NDLI: Rotating Slumps in a Monetary Union

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Rotating Slumps in a Monetary Union

Content Provider	Springer Nature Link
Author	Landmann, Oliver
Copyright Year	2010
Abstract	In the decade since its creation in 1999, the European Economic and Monetary Union (EMU) has experienced surprisingly large and persistent inflation differentials across member states causing substantial shifts in relative price levels. At the same time, member countries exhibited distinct non-synchronized output fluctuations, giving rise to a pattern of ‘rotating slumps’ (a term coined by Olivier Blanchard). This paper presents a stylized theoretical model of a monetary union which demonstrates how inflation differentials and relative output movements interact dynamically. A number of implications are derived from the model. In particular, national fiscal policies are shown to have an important role in containing internal macroeconomic disparities in a monetary union. An optimal fiscal policy rule is derived from the model for that purpose.
Starting Page	303
Ending Page	317
Page Count	15
File Format	PDF
ISSN	09237992
Journal	Open Economies Review
Volume Number	23
Issue Number	2
e-ISSN	1573708X
Language	English
Publisher	Springer US
Publisher Date	2010-11-18
Publisher Place	Boston
Access Restriction	One Nation One Subscription (ONOS)
Subject Keyword	Monetary union Inflation differentials Cyclical fluctuations Dynamic adjustment Monetary policy Fiscal policy Development Economics International Economics
Content Type	Text
Resource Type	Article
Subject	Economics and Econometrics

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