European Monetary Union and Asymmetric Shocks in a New Keynesian Model
AbstractThis paper attempts to quantify the costs imposed by asymmetric shocks under European Monetary Union compared to free floating. A simple two-country model is examined where policy is set in an optimal, time consistent manner. Nominal and real rigidities are present in both economies, but prices are set in a forward looking manner and expectations are rational. Results suggest that the costs of asymmetric shocks under EMU may be significantly higher than under free floating, particularly if fiscal policy is not used for demand management. Copyright 1999 by Royal Economic Society.
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Bibliographic InfoArticle provided by Oxford University Press in its journal Oxford Economic Papers.
Volume (Year): 51 (1999)
Issue (Month): 4 (October)
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- Tatiana Kirsanova & Mathan Satchi & David Vines & Simon Wren-Lewis, 2007.
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Documentos de Trabajo - Lan Gaiak Departamento de EconomÃa - Universidad PÃºblica de Navarra
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- Carmen Díaz-Roldán, 2000. "Coordination Of Fiscal Policies In A Monetary Union," Working Papers 00-09, Asociación Española de Economía y Finanzas Internacionales.
- Carmen Díaz-Roldán, . "Coordination of Fiscal Policies in a Monetary Union," Working Papers on International Economics and Finance 00-09, FEDEA.
- Óscar Bajo Rubio & Carmen Díaz Roldán, 2000. "On The Insurance Function Of Fiscal Policy In A Monetary Union," Documentos de Trabajo - Lan Gaiak Departamento de EconomÃa - Universidad PÃºblica de Navarra 0012, Departamento de Economía - Universidad Pública de Navarra.
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