International Policy Transmissions Before and After Establishing a Monetary Union

Rumler, Fabio (September 1999) International Policy Transmissions Before and After Establishing a Monetary Union. IHS Economics Series 71

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Abstract: This paper analyzes the effects of the implementation of a monetary union on the international transmission of monetary and fiscal policies. A dynamic three-country general equilibrium model, exhibiting monopolistic competition and sticky prices, is used to show how asymmetric monetary and fiscal policy shocks affect the production and consumption decisions in the three countries. The international effects of asymmetric monetary and fiscal policy shocks are then compared with respect to the two situations - before and after the implementation of a (two-country) monetary union. It is shown that all key economic variables of the two countries forming a monetary union react completely symmetrically to no longer independent monetary and fiscal policy shocks. Even the fiscal policies of the countries forming a monetary union themselves turn out to become symmetric, although, in principle, there is no particular need for government spending levels to be fully synchronized within amonetary union.;

Item Type: IHS Series
Keywords: 'Macroeconomic policy transmissions' 'Exchange rate arrangements' 'EMU'
Classification Codes (e.g. JEL): E63, F33, F42
Status: Published
Date Deposited: 26 Sep 2014 10:37
Last Modified: 26 Jul 2017 08:20
URI: http://irihs.ihs.ac.at/id/eprint/1192

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