Stabilizing Valences of an Optimum Monetary Zone in a Resilient Economy—Approaches and Limitations

Abstract

: Following De Grauwe (2016), this research advances the idea according to which economies that are part of a monetary union issue debt in a medium of exchange they cannot control: financial markets develop the capacity to impose default on such economies. We are interested in how previous research analyzed the notion that, when economies are autonomous and they employ the exchange rate as a vehicle to handle asymmetric shocks, they confront comparable constraints on the performance of exchange rate strategies. When a monetary union is affected by significant asymmetric shocks, the member economies have to deal with tough adjustment issues. Empirical and secondary data are used to back the assertion that, in a monetary union, economies that are affected by long-lasting asymmetric demand shocks demand wage elasticity and labor flexibility to rectify for them, and if the latter generate substantial budget deficits, financial markets tend to intensify the consequences of the asymmetric shocks, boosting the demand for severe regulation of wages and labor flexibility. Our article makes conceptual and methodological contributions to the view that member economies of a monetary union are exposed to varying market reactions, generating more volatility in the business cycle: an economy undergoing a recession and a rise in the budget deficit might be affected by wide-ranging transactions of its government bonds, causing a liquidity crisis and superior interest rates, and possibly coercing the government of that economy to adopt budgetary austerity measures, thus intensifying the recession.

Inflation: Viewed in terms of Economic Structure, Aggregate Expenditure, Wages and Currency Value in a Review

“…Furthermore (Dietrich et al, 2022) (Dietrich et al, 2022)POPESCU et al, 2013 with the (POPESCU et al, 2013) (Tang, 2014) with results (Tang, 2014) research on inflation and labor productivity in Malaysia has two-way causality in the short and long term, (Santoso & Kristiyanto, 2021)R2 coefficient of determination research of 0.78 show that inflation and wages can explain 78 percent of the variation in the unemployment rate in East Java Province. The rest (22%) is determined by other variables outside the model.…”

Digital Transformation to Support Resilient Economies and Stakeholder Capitalism

“…Economic resilience is the capability of a national economy to take preparatory crisis-management measures, mitigate the direct consequences of crises, and adapt to changing circumstances. In this regard, the degree of resilience will be determined by how well the actions and interplay of the political, economic, and societal spheres can safeguard the performance of the economyas measured against the societal objective functionalso after a crisis [29]. The components of economic resilience are illustrated in Fig.…”