Abstract
This paper deals with an evaluation of the impact of stability of the money and prices by measuring the volatility of exchange rate of euro versus dollar and the volatility of harmonized index consumer prices HICPs. A GARCH model is used to estimate volatility indices. These indices are used to evaluate the effect of stability of the money and prices on economic development (represented by GDP per capita and unemployment rate) in 11 of the Eurozone member states over the period 2002-2014. By running a linear regression of the volatility indices and other variables on GDP per capita and unemployment rate, we can see that the impact of stability of money on the economic growth and employment is positive while the impact of stability of prices on them is negative.
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