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Markets Integration and Macroeconomic. Dispersion in a Monetary Union

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  • Aurélien Eyquem
  • Jean-Christophe Poutineau

Abstract

Using a two?country DGSE combining nominal rigidities and financial frictions, we show that the persistence of output and inflation asymmetries observed since 1999 in an increasingly integrated EMU is not necessarily puzzling. Only the integration of intermediate goods markets unambiguously leads to a reduction of asymmetries while the integration of finals goods markets and the integration of financial markets increase the dispersion of inflation rates and business cycles. The result builds on the intensive use of financial markets, i.e. the current account, to adjust externally and smooth the consequences of asymmetric shocks. This mechanism implies a disconnection of country?level outputs and/or inflation rates to ensure that agents return to their initial asset position in the long run. JEL Classification : E32 ; F32 ; F41.

Suggested Citation

  • Aurélien Eyquem & Jean-Christophe Poutineau, 2010. "Markets Integration and Macroeconomic. Dispersion in a Monetary Union," Recherches économiques de Louvain, De Boeck Université, vol. 76(1), pages 5-30.
  • Handle: RePEc:cai:reldbu:rel_761_0005
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    Cited by:

    1. Jean-Christophe Poutineau & Gauthier Vermandel, 2014. "Intégration bancaire et conjoncture macroéconomique dans une union monétaire hétérogène," Post-Print hal-01345378, HAL.
    2. Poutineau, Jean-Christophe & Vermandel, Gauthier, 2015. "Cross-border banking flows spillovers in the Eurozone: Evidence from an estimated DSGE model," Journal of Economic Dynamics and Control, Elsevier, vol. 51(C), pages 378-403.
    3. Jean-Christophe Poutineau & Gauthier Vermandel, 2015. "Quelle prise en compte des caractéristiques nationales dans les mesures macroprudentielles en zone euro ?," Revue française d'économie, Presses de Sciences-Po, vol. 0(3), pages 95-141.
    4. Jean-Christophe Poutineau & Gauthier Vermandel, 2017. "A Welfare Analysis of Macroprudential Policy Rules in the Euro Area," Revue d'économie politique, Dalloz, vol. 127(2), pages 191-226.
    5. JEAN-CHRISTOPHE POUTINEAU & GAUTHIER Vermandel, 2013. "Integration Bancaire Et Conjoncture Macroeconomique Dans Une Union Monetaire Heterogene: The Macroeconomic Consequences Of Banking Integration In An Heterogenous Monetary Union," Brussels Economic Review, ULB -- Universite Libre de Bruxelles, vol. 56(3-4), pages 241-260.
    6. Jean-Christophe Poutineau & Gauthier Vermandel, 2017. "A Welfare Analysis of Macroprudential Policy Rules in the Euro Area," Post-Print hal-01619806, HAL.

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    More about this item

    Keywords

    Monetary union; markets integration; trade openness; inflation dispersion; output dispersion;
    All these keywords.

    JEL classification:

    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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