Inflation differentials within European Monetary Union (EMU) are increasingly seen as exerting adverse effects on the … price competitiveness of member countries' firms and – given the common monetary policy within EMU – as being detrimental to … international price competitiveness for EMU countries, the paper analyses whether these indicators have displayed distinctive trends …

) by specifying an open-economy version of a two-region New Keynesian model for EMU and demonstrate that the result by … EMU and sustainability in the case, prevailing currently, where a high debt country should both restore its …

Real exchange and interest rates may still fluctuate inside the EMU and give rise to changes in competitiveness. We … divergence should urge on a wave of restructuring in the EMU, conditioned upon adequate policy responses. The worst-case scenario … involves a flight to structural support and protectionism, challenging the whole idea of the EMU. …