European Monetary Union
| Claudia Kwapil/Ernest Gnan | July 13 – July 24 | 4 ECTS credits |
In no other area has European integration advanced as much as in the monetary sphere. By joining the European Economic and Monetary Union (EMU), 20 countries of the European Union have given up their national currencies and their monetary sovereignty and have created a common monetary area with a joint central banking system (Eurosystem) and a common European currency (euro). On the one hand, the euro – in form of notes and coins – provides a strong common European symbol. On the other hand, it is a powerful policy instrument.
In recent years, financial and debt crises – along with the COVID-19 pandemic – have highlighted the power of monetary policy. Since 2008, the Eurosystem has introduced various measures, from negative interest rates to asset purchases, which helped soften the impact of these crises. Between 2021 and 2023, fighting surging inflation became the top priority in the euro area, like in many other parts of the world. Inflation is now under control, but monetary policy remains dynamic and is never dull. Emerging challenges, such as financial system digitalisation, are already on the horizon.
This course will enable you to answer the following questions:
- Why do most central banks have an inflation target? And why in many cases of 2%?
- How do central banks influence economic growth and inflation?
- Which instruments do they have at their disposal? And how do they work?
- Why should central banks be independent institutions?
- Is the euro area an “optimal currency area” as described in textbooks?
- What are the objectives and instruments of different areas of economic policy (fiscal policy, structural policy, financial stability policy)? What is the division of labour with central banks?
- What are the different views on the further development and deepening of the euro area?
- Will there be a digital euro for euro area citizens in the future? And how will the digital euro differ from other forms of digital money or stablecoins?
Requirements: Active class participation (20 %), mid-term exam (40 %), and final exam (40 %).