Economic sustainability and possibilities of action for the states, in the case of monetary integration: some notes for reflection Online publication date: Mon, 01-Aug-2016
by Jose Picatoste; Santos Ruesga-Benito; Fernando González-Laxe
Progress in Industrial Ecology, An International Journal (PIE), Vol. 10, No. 1, 2016
Abstract: The economic crisis that began in 2008 highlighted the difficulties faced by those national economies members of a monetary area. Such is the case of the countries in the euro area. In this situation, the possibilities of increasing the international competitiveness of the domestic economy are severely reduced. This paper presents a theoretical analysis of the fundamentals of real exchange rate and the factors influencing pricing, focusing on the degree of competition in the markets and the cost structure. It is undertaken through the study of maximising corporate profits, formation of labour costs and determinants of market structure, contextualised in a currency area. The findings clearly show that there are efficient policies that can be applied in order to increase domestic competitiveness through internal devaluation; nevertheless, the results show that a loss of purchasing power of workers will probably be the result, while corporate profit margins grow.
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