Competitiveness adjustment in struggling southern euro-area members requires persistently lower inflation than in major … trading partners, but low inflation worsens public debt sustainability. When average euro-area inflation undershoots the two … baseline scenario, the projected public debt ratio reduction in Italy and Spain is too slow and does not meet the European …

aggregate. For the case of Italy, results are less clear. From the estimated money demand functions, we derive both EMU-4 and …-specific measures, particularly since the start of EMU, and is useful to predict country-specific inflation. However, it generally does … not encompass country-specific money overhang measures as predictors of inflation. Hence, aggregate money overhang is an …

Competitiveness adjustment in struggling southern euro-area members requires persistently lower inflation than in major … trading partners, but low inflation worsens public debt sustainability. When average euro-area inflation undershoots the two … baseline scenario, the projected public debt ratio reduction in Italy and Spain is too slow and does not meet the European …