NDLI: EMU in Reality: The Effect of a Common Monetary Policy on Economies with Different Transmission Mechanisms

Content Provider	Springer Nature Link
Author	Hughes Hallett, Andrew Piscitelli, Laura
Copyright Year	1999
Abstract	The theory of optimal currency areas states that a single currency zone should have symmetry of shocks and structures across regions. Research on monetary union in Europe has either assumed these conditions to hold close enough not to cause problems, or has focussed on asymmetries in shocks. But what if economic structures and/or market responses differ between countries or regions? This paper examines the consequences of a single monetary policy when there are asymmetries in i) the monetary transmissions; ii) the wage/price transmissions; and iii) private sector asset holdings. We find the first and last destabilise the business cycle, and put countries out of phase with one another in a way that cannot be corrected by deficit constrained fiscal policies. The effect is to delay convergence.
Starting Page	337
Ending Page	358
Page Count	22
File Format	PDF
ISSN	03408744
Journal	Empirica
Volume Number	26
Issue Number	4
e-ISSN	15736911
Language	English
Publisher	Kluwer Academic Publishers
Publisher Date	1999-01-01
Publisher Place	Boston
Access Restriction	One Nation One Subscription (ONOS)
Subject Keyword	Economic Growth Industrial Organization International Economics Political Science
Content Type	Text
Resource Type	Article
Subject	Geography, Planning and Development Development Economics and Econometrics

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EMU in Reality: The Effect of a Common Monetary Policy on Economies with Different Transmission Mechanisms