If multiple countries share a currency and one country experiences high inflation, how are the other countries affected?

Question

I’m thinking mainly of the US dollar. Is the inflation rate in the US reflected in other countries which use the dollar or which have currencies pegged to the dollar?

Is this different in the EU, where no one country emits the shared currency?

In: 5

Answer 1

A country doesn’t experience inflation, a currency does. Usually, an individual country with its own currency has the power to control how much currency flows in the economy through the interest rate and can lower or raise taxes to help stimulate or slow down the economy. The EU on the other hand has one central bank and 27 different countries with 27 different governments with different tax policies.