Confronting the Inflationary Pressures of Introducing the Euro with the Effects of Negative External Shocks
oraz | 09 cze 2023
Data publikacji: 09 cze 2023
Zakres stron: 194 - 207
Otrzymano: 21 lis 2022
Przyjęty: 16 mar 2023
DOI: https://doi.org/10.2478/foli-2023-0010
Słowa kluczowe
© 2023 Petra Popek Biškupec et al., published by Sciendo
This work is licensed under the Creative Commons Attribution-ShareAlike 4.0 International License.
Research background
with the introduction of the euro as the domestic currency, economies have faced inflationary pressures caused by price convergence towards higher levels. During the last period of significant negative shocks from the environment, by entering the euro area, the negative effects of the likelihood of inflation caused by the introduction of the euro may be absent.
Purpose
the aim of this paper is to prove that inflation caused by joining the euro area will not materialize due to the negative effects of external shocks.
Research methodology
A panel analysis with a fixed effects model was conducted for two models. Model 1 represents the countries that introduced the euro before the escalation of the global financial crisis and Model 2 represents the countries that introduced the euro after the development of the global financial crisis.
Results
the research confirmed that due to current negative external shocks and rising long-term interest rates in financial markets, the effect of inflation due to the introduction of the euro will be absent among EU members that will adopt the euro as a common currency in the next few years.
Novelty
The results of the research contribute to the scientific prediction of business and financial trends. The creators of macroeconomic models and monetary policy can use the results to define measures, instruments and activities more precisely for achieving and maintaining macroeconomic balance.