A country in the European Monetary Union that runs very large public deficits or shows a persistently

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A country in the European Monetary Union that runs very large public deficits or shows a persistently high and rising debt-to-GDP ratio violates a fiscal compact among the member countries of the union. Explain how this fiscal violation poses a challenge for the ECB in the form of moral hazard.

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Money Banking and Financial Markets

ISBN: 978-0078021749

4th edition

Authors: Stephen Cecchetti, Kermit Schoenholtz

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