But we know all these, why was the EU zone not successful? As noted by Sargent and Wallace in their famous article “Some unpleasant monetarist arithmetic”, “tighter money today leads to higher inflation not only eventually but starting today”.
The paradox for tight monetary policy and heavy debt expansion will lead to economic stagnation, Eddie Buffie has demonstrated this for a number of countries in this region. Moreover, ladies and gentlemen, the lack of credibility of the overall policy framework caused by the long-term inconsistency of such mix in signals diminishes the effectiveness of monetary policy.