Title: Economic sustainability and possibilities of action for the states, in the case of monetary integration: some notes for reflection
Authors: Jose Picatoste; Santos Ruesga-Benito; Fernando González-Laxe
Addresses: Faculty of Economics and Business, Department of Economic Structure and Development Economics, University Autonomous of Madrid, C/Francisco Tomás y Valiente, 5, Ciudad Universitaria de Cantoblanco, 28049 Madrid, Spain ' Faculty of Economics and Business, Department of Economic Structure and Development Economics, University Autonomous of Madrid, C/Francisco Tomás y Valiente, 5, Ciudad Universitaria de Cantoblanco, 28049 Madrid, Spain ' University Institute of Maritime Studies, University of A Coruña, Campus Elviña s/n A Coruña 15071, Spain
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.
Keywords: economic crisis; currency areas; eurozone; quality of life; economic sustainability; social sustainability; monetary integration; exchange rates; pricing; market competition; cost structure; corporate profits; labour costs; market structure; domestic competitiveness; internal devaluation; purchasing power; profit margins.
Progress in Industrial Ecology, An International Journal, 2016 Vol.10 No.1, pp.16 - 33
Received: 13 Mar 2015
Accepted: 03 Nov 2015
Published online: 01 Aug 2016 *