The economic crisis triggered by the COVID–19 pandemic once again raises doubts about the eurozone's ability to deal with joint economic problems given its dissimilar dynamics and asymmetries. This chapter contributes to a paradigm shift in the governance of the euro area towards a more...

In this chapter, we propose a two-country, two-sector, New Keynesian model with essential and non-essential goods for the Euro Area to assess the macroeconomic consequences of a labor supply shock. Our model incorporates health status in the households’ maximization problem which depends on...