chapter  Chapter 2
34 Pages

Accepting a Challenge: Joining the Western European Club

WithBruno S. Sergi

A comparative trade and financial approach have attempted to identify and document possible patterns in these variables and explain them in relation to the Western economy and to what extent these economies are catching up with advanced Western economies. In the European type of economic union, monetary policy is centralized and fiscal policies are “partially” independent although constrained by the stability and growth pact budgetary rules. The views among economists may likely differ, especially considering the timing of membership in the European Monetary Union, which involves the adoption of supplementary criteria so as to embrace the performance of the economic activity. The simple model developed herein draws a comparison between eighteen transition economies, Greece, and Portugal. A successful economic strategy directed to lower the rate of unemployment and speed up production would hinge on an expansion of money supply engineered in a way that surprises economic agents and affects their expectations about inflation outcomes.