The euro is speeding up financial market integration. Those parts of the European financial markets that are crucial to the transmission of the Eurosystem’s monetary policy are already integrated to our satisfaction. The wholesale market for interbank liquidity in the euro area is now actually a single European money market. In addition, European banks are interconnected in a common payment-system infrastructure.
My impression, reinforced by the papers at this conference, is that many of the newer empirical structural models of price inflation posit a central role for real marginal cost but seem to have little to say about its determination or that of its main component, labor compensation.