the market economy.
The reasons for this disconnect are largely two: tax policy in recent decades and recent monetarypolicy. It would be impossible to discuss those policies in detail here. Therefore, we shall limit ourselves to some rather
2017 ). (German reservations were later rejected by the European Court of Justice which acknowledged that the OMT was needed to maintain an effective monetarypolicy transmission.) The OMT provides two key insights for our paper. First, it highlights
nominal exchange rates and more broadly, own monetarypolicy ( Mundell 1961; McKinnon 1963; Kenen 1969; De Grauwe 2012 ). To put it otherwise, currency unions create a trap or an impossible trinity. The trilemma states that out of exchange rate stability
scale and scope. It involves highly accommodative monetarypolicy and increased government support in the form of Job Retention Schemes, guarantees, repayment moratoria, tax cuts, subsidies and transfers of various kinds; as well as legal and regulatory
, fiscal and monetarypolicy are useful tools to manage cyclical slowdown, but much less useful in counteracting secular, structural decline. As I illustrated above, pre-virus growth rates were halved in a decade, and that despite the ongoing joint fiscal
likelihood of privatization grows when it is important to decrease government spending. This strengthens the position of the Treasury or finance minister in their bargaining with “spending” ministries, just as a strict monetarypolicy does ( Boyco et al. 1996
little that can be achieved here simply by raising interest rates, but there is no escape from resorting to this monetarypolicy instrument either.
After all, attempts to counter inflation using this method must be approached very prudently
monetarypolicy frameworks. Achieving price stability remains the main stabilization task. The exchange rate regimes of the former Communist countries in the region are quite diverse, ranging from stabilized arrangements to free floating. This diversity can