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Financial integration and macroeconomic adjustments in a monetary union

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Author Info

  • Vincent Duwicquet
  • Jacques Mazier

Abstract

In a monetary union, such as the euro zone, adjustments facing asymmetric evolutions are more difficult due to fixed intra-European exchange rates. Well-integrated capital markets, with portfolio diversification and intrazone credit, would constitute a powerful adjustment mechanism, according to the "international risk-sharing" approach. A different approach is adopted, based on a "stock-flow consistent" model of a monetary union along the lines of Godley and Lavoie (2007). Two results can be underlined. Holding foreign assets has a stabilizing role, but the capital income stabilizing coefficient seems small. By contrast, intrazone credit seems to have no specific stabilization effects.

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Bibliographic Info

Article provided by M.E. Sharpe, Inc. in its journal Journal of Post Keynesian Economics.

Volume (Year): 33 (2010)
Issue (Month): 2 (January)
Pages: 333-370

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Handle: RePEc:mes:postke:v:33:y:2010:i:2:p:333-370

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Web page: http://mesharpe.metapress.com/link.asp?target=journal&id=109348

Related research

Keywords: international finance; open economy macroeconomics; Post Keynesian modeling;

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Cited by:
  1. Duwicquet, Vincent & Mazier, Jacques & Saadaoui, Jamel, 2012. "Désajustements de change, fédéralisme budgétaire et redistribution : comment s’ajuster en union monétaire
    [Exchange Rate Misalignments, Fiscal Federalism and Redistribution: How to Adjust in
    ," MPRA Paper 42858, University Library of Munich, Germany.
  2. Vincent Duwicquet & Jacques Mazier & Jamel Saadaoui, 2012. "Exchange Rate Misalignments, Fiscal Federalism and Redistribution: How to Adjust in a Monetary Union," Post-Print halshs-00848886, HAL.
  3. Saadaoui, Jamel, 2012. "Déséquilibres globaux, taux de change d’équilibre et modélisation stock-flux cohérente
    [Global Imbalances, Equilibrium Exchange Rates and Stock-Flow Consistent Modelling]
    ," MPRA Paper 51332, University Library of Munich, Germany.
  4. Eugenio Caverzasi & Antoine Godin, 2013. "Stock-flow Consistent Modeling through the Ages," Economics Working Paper Archive wp_745, Levy Economics Institute.

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