ABSTRACT
This chapter attempts to keep up with the economic literature on transitional political economy, inferring a basis in order to coherently follow recent results of such an “interplay,” and the challenge of a broader European Union. The design of the Western literature may highlight past and current economic developments and explain macroeconomic alternatives in Europe likewise. The pillars of macroeconomic thinking in the 1960s were adaptive expectations, sticky prices, and wage formation theories. The economic process is specified around the Phillips tradeoff between inflation and the unemployment rate. The crux of the theory rests on the idea that participating European countries are “isolated” in their economic dissimilarities, unlike the Rogoff scenario that stresses unified economies. The political-tradeoff, economic-benefit costs would operate differently, as was seen in the paternalistic case. The setting becomes more informative because players know more not only about each other over time, but also about the economic structures, objectives, and past behaviors.
