The stability effects which the euro’s arrival has brought about and which have improved growth potential in the zone, cover other types of stability: price stability and fiscal stability. 1.
There can be no doubt that both deflation and inflation are harmful for both output and welfare in the medium term: they distort the information contained in the price system, imperceptibly change the real value of contracts and savings and heighten uncertainty. They consequently disturb the allocation of resources, the investment process and the income distribution.