Suchergebnisse

This paper takes a first step in analysing how a monetary union performs in the presence of labour market asymmetries. Differences in wage flexibility, market power and country sizes are allowed for in a setting with both country-specific and aggregate shocks. The implications of asymmetries for both the overall performance of the monetary union and the country-specific situation are analysed. It is shown that asymmetries can have important effects, and that there are substantial spill-over effects. Among other things, it is found that aggregate output volatility is not strictly increasing in nominal rigidity but hump-shaped. A disproportionate share of the consequences of wage inflexibility may fall on small countries. In the case of country-specific shocks a country unambiguously benefits in terms of macroeconomic stability by becoming more flexible, but in general an inflexible country does not necessarily achieve more output stability by becoming more flexible. As this may be desirable for the monetary union as a whole, there is a risk of a ?reform deficit? in an asymmetric monetary union.

This paper investigates the dynamic effects of monetary and fiscal policy in a monetary union, which is characterized by asymmetric interest rate transmission. This asymmetry gives rise to intertemporal reversals in the relative effectiveness of policy on member country outputs. The direction and the number of these reversals depend on whether policies are unanticipated or anticipated. We also study the coordination between monetary and fiscal policy in a monetary union. Monetary policy may completely stabilize European output after unanticipated fiscal policy shocks. With anticipated fiscal policy shocks, complete stabilization throughout the overall adjustment process requires monetary policy to be time-inconsistent.

We use a two-country model with a central bank maximizing union-wide welfare and two fiscal authorities minimizing comparable, but slightly different country-wide losses. We analyze the rivalry between the three authorities in seven static games. Comparing a homogeneous with a heterogeneous monetary union, we find welfare losses to be significantly larger in the heterogeneous union. The best-performing scenarios are cooperation between all authorities and monetary leadership. Cooperation between the fiscal authorities is harmful to both the whole union's and the country-specific welfare.

We use a two-country model with a central bank maximizing union-wide welfare and two fiscal authorities minimizing comparable, but slightly different country-wide losses. We analyze the rivalry between the three authorities in seven static games. Comparing a homogeneous with a heterogeneous monetary union, we find welfare losses to be significantly larger in the heterogeneous union. The best-performing scenarios are cooperation between all authorities and monetary leadership. Cooperation between the fiscal authorities is harmful to both the whole union's and the country-specific welfare.

This contribution to the panel on the future to EMU discusses the tensions that arise from the fact that banks are, on the one hand, an essential element of the monetary transmission mechanism and, on the other hand, an integral part of local, regional or national polities. Banking union can eliminate or at least reduce some of the procrastination that has allowed maintained bank weaknesses to persist and harmed the transmission of monetary policy but, whereas the SSM has been fairly successful, resolution is still not working properly and needs further reforms. At the same time, banking union suffers from the problem that interventions from Brussels or Frankfurt are seen as infringements of national sovereignty that lack political legitimacy. The conflict between supranational and national interests is ultimately irresolvable but, if EMU is to survive, measures must be taken to limit its impact.

Twenty-five years ago, East Germany adopted the deutschmark as its currency. In terms of East German economic development, monetary union proved to be a disaster. With virtually no warning, East Germany's few productive factories and businesses were exposed to free market competition; industrial production collapsed in a way unparalleled in history. Nevertheless, for political reasons, introducing monetary union at the start of the process of system transformation was almost unavoidable. Given the insecure foreign policy situation, the aim was to seize the chance of reunification and push through monetary union to create an irreversible fait accompli. Moreover, this move was intended to put a brake on the massive exodus of people from East Germany. Admittedly, it also buttressed the widespread illusion among the East German population that a strong currency would facilitate fast-track income parity on West German levels. This illusion, however, also encouraged excessive wage hikes which only served to intensify the shock of alignment in summer 1990, complicate economic renewal in eastern Germany, and increase the financial costs.

We use the two-country model of the euro area developed by Quint and Rabanal (2014) to study policymaking in the European Monetary Union (EMU). In particular, we focus on strategic interactions: 1) between monetary policy and a common macroprudential authority, and; 2) between an EMU-level monetary authority and regional macroprudential authorities. In the first case, price stability and financial stability are pursued at the EMU level, while in the second case each macroprudential authority adopts region-specific objectives. We compare cooperative equilibria in the simultaneous-move and leadership solutions, each obtained assuming policy discretion. Further, we assess the effects on policy performance of assigning shared objectives across policymakers and of altering the level of importance attached to various policy objectives.

This paper explores the optimal allocation of government bond purchases within a monetary union, using a two-region DSGE model, where regions are asymmetric with respect to economic size and portfolio characteristics: the extent of substitutability between assets of different maturity and origin, asset home bias, and steady-state levels of government debt. An optimal quantitative easing (QE) policy under commitment does not only reflect different region sizes but is also a function of these dimensions of portfolio heterogeneity. By calibrating the model to the euro area, we show that optimal QE favors purchases from the smaller region (Periphery instead of Core), given that the former faces stronger portfolio frictions. A fully optimal policy consisting of both the short-term interest rate and QE lifts the monetary union away from the zero lower bound faster than an optimal interest rate policy alone, which entails forward guidance.

Defence date: 24 November 2006 ; Examining Board: Prof. Michael J. Artis ; Prof. Marco Buti ; Prof. Ilian Mihov ; Prof. Rick van der Ploeg ; First made available online 16 May 2018 ; The economic and monetary union (EMU) is characterized by a framework for economic policy-making in Europe which is unique. While the single monetary policy is oriented towards a Union-wide objective, namely the maintenance o f price stability, the other policy areas involving fiscal and wage policies largely remain the competence o f national governments and other national actors. This thesis investigates some o f the mechanisms o f propagation o f asymmetric shocks in a monetary union and the effect that they may have on the conduction of policies and ultimately on macroeconomic variables. In the context o f the European Monetary Union (EMU), and without any pretension to be exhaustive, the question is addressed o f whether the current framework o f policy coordination, based on a common monetary policy oriented to price stability, national autonomy o f fiscal policies within common budgetary rules and wage policies determined at the national level, is appropriate in ensuring macroeconomic stabilization. The focus on asymmetric shocks is due to the specific importance they have in a monetary union. In the case of symmetric shocks, the situation is not veiy different from that o f a country which has its own currency. On the other hand, the effects of asymmetric shocks on policies and macroeconomic outcomes in a monetary union was (and probably is) not yet completely understood. It is partially because o f this lack o f understanding that the presence of big asymmetric shocks was used by economists as a criterion to decide whether a country should join the EMU.

This paper examines the historical pattern of aggregate demand and supply shocks in several European Monetary System countries in order to assess the desirability of monetary union. Countries with similar patterns of shocks are presumably better candidates for monetary union than those hit by wildly disparate shocks. The historical time series of shocks is identified by estimating a vector autoregressive model while imposing the restriction that demand shocks have no permanent effect on real output. In most cases supply shocks are positively correlated with those of Germany, but the negative correlation of demand shocks suggests that monetary union may not be desirable.

The paper analyses various mechanism through which monetary union in Europe may affect unemployment. The focus is on the political incentives for labour-market reform. There will be more reform outside than inside the EMU to the extent that a national inflation bias can be reduced. But if there is a precautionary motive for low average unemployment in order to reduce the utility cost of macroeconomic variability, there could be more reform in a monetary union. Labour-market reform to increase wage fexibility as a substitute for domestic monetary policy and transition costs of reform are also analysed. The net effect of monetary union on unemployment is ambiguous.

Journal of International Money and Finance Volume 19, Issue 3, June 2000, Pages 419-432. ; This paper employs systems-based cointegration techniques developed by [Reference to Johansen] and [Reference to Johansen] to determine which European Union countries would form a successful Economic and Monetary Union (EMU), based on long-run behavior of the nominal convergence criteria laid down in the Maastricht treaty. The original 12 European Union countries are analyzed together. Nominal exchange rates, real exchange rates, long-term interest rates, and government budget deficits are each analyzed for co-movements among the 12 countries and various subgroups of them. The results suggest that not all of the 12 original countries of the European Union can form a successful EMU over time, unless several countries make significant adjustments.

This volume contains the contributions of a conference dealing with the consequences of the European Monetary Union for the macroeconometric modelling of the Euro area, which took place in Essen in 2000. At the end of the conference the participants were convinced that the discussions including a great variety of theoretical, methodical and factual aspects from the producers' as well as the consumers' perspective will not fail to have a certain impact on the future development of macroeconometric modelling in the Euro area. Once more it became clear, however, that an ideal way to a solution of the problems is still not in sight. The future development will be characterized by a plurality of approaches and models. Thus trends continue which have had a more or less strong, durable or temporary influence on the model landscape since the emergence of the monetarist revolution, the "rational expectations" or the "real business cycle"-models. We are still at the beginning of the theoretical and empirical exploration of the macroeconomic development of the Euro area, it is not always clearly perceptible what is transitory and what is permanent, and this openness should facilitate the reception of the experiences and results which have been presented. The idea for this event was developed in the course of the Project LINK. One of the highlights of the conference was the participation of the nobel prize winner Professor Dr. Lawrence Klein - pioneer and Nestor of macroeconometric modelling - who, as his contribution shows, is following up the creation of the European Monetary Union with critical interest.

We examine monetary and fiscal interactions in a monetary union model with uncertainty due to imperfect central bank transparency. It is first shown that monetary uncertainty discourages excessive taxation and may thus reduce average inflation and output distortions. However, as countries enter the monetary union, this tax-restraining effect of uncertainty is mitigated. The monetary union may hence lead to higher fiscal distortions in some member countries, depending on governments' spending targets and on the change in the degree of uncertainty implied by common monetary policy.

In this paper, we present an application of the dynamic tracking games framework to a monetary union. We use a small stylized nonlinear three-country macroeconomic model of a monetary union to analyze the interactions between fiscal (governments) and monetary (common central bank) policy makers, assuming different objective functions of these decision makers. Using the OPTGAME algorithm, we calculate solutions for several games: a noncooperative solution where each government and the central bank play against each other (a feedback Nash equilibrium solution), a fully-cooperative solution with all players following a joint course of action (a Pareto optimal solution) and three solutions where various coalitions (subsets of the players) play against coalitions of the other players in a noncooperative way. It turns out that the fully-cooperative solution yields the best results, the noncooperative solution fares worst and the coalition games lie in between, with a broad coalition of the fiscally more responsible countries and the central bank against the less thrifty countries coming closest to the Pareto optimum.