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The Shameful Rate of Unemployment in the EMS 271
7 Conclusion
There is no denying that the scheme of cooperation outlined in section 6.4 is
highly ambitious and probably equally complex. I would suggest however that
the greatest difficulty would be encountered in the first round. Thereafter, all that
should be required are marginal adjustments.
But in my view, unless one can secure the kind of coordinated, responsible
behavior suggested here, it will not be possible to satisfy in the EMS the reasonable,
and in principle, perfectly consistent and achievable ambitions of
exchange stability, price stability and low unemployment.
Appendix: An Alternative Decomposition of the Effect of the
Availability of Jobs and Shifts in the Beveridge Curve on
Unemployment
The issues involved can be best understood by reference to figure 8.3. Suppose
that initially the labor market conditions can be described by point A generated
by the intersection of the initial constraint C(A) with the base Beveridge curve k
14
u
12
10
C(D)
8
6
u(D)
u(B)
4
D
B
C(A)
Figure 8.3
u(C) 2
u(A)
v
–6 –4 –2 0 0 v(B) v(D) 2 v(A) 4 6
j(D)
j(A) v(C)
A
C
uv = k’
uv = k