A nice discussion of the granular economy and real business cycle theory where the fortunes of one company can affect the entire economy.
New Zealand is in the same position with Fonterra – the dairy exporter that accounts for 7% of GDP.
This morning I am flying to Finland to speak about the outlook the Polish economy at a seminar in Helsinki. That is the inspiration for what I will talk about in this post – or rather I will tell the story of how an asymmetrical negative supply shock – combined with euro membership – has sent the Finnish economy into recession. It is (partly) a story of the demise of Finland’s best known company Nokia.
A cornerstone in Optimal Currency Area theory is that two countries should only join in a currency union if the shocks that hit the economies tend to be symmetrical. Hence, economic shocks should tend to hit both economies at the same time and by more or less the same magnitude.
A shock the oil price is a good example of a symmetrical supply shock to the euro zone countries as all the euro area countries…
View original post 1,427 more words
Utopia, you are standing in it! 
Recent Comments