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On the Cost of Moving from a Quasi Monetary Union to a Full Monetary Union: The Case of the Netherlands

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Author Info
W. Jos Jansen

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Abstract

We analyze the effects of a contractionary Dutch monetary policy shock that is consistent with the fixed guilder/mark exchange rate. Although monetary policy shocks are quite small, they do have plausible effects: credit, expenditures, output and prices all fall after a monetary tightening. Policy shocks account for non-negligible parts of the forecast error variance of macroeconomic variables. EMU membership thus entails a non-trivial sacrifice in terms of macroeconomic stabilization - even for the Netherlands, which many deemed to be in a quasi monetary union with Germany.

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Publisher Info
Paper provided by Netherlands Central Bank, Monetary and Economic Policy Department in its series MEB Series (discontinued) with number 2000-1.

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Date of creation: Jan 2000
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Handle: RePEc:dnb:mebser:2000-1

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Web page: http://www.dnb.nl/en/
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Related research
Keywords: monetary union; monetary transmission; VAR models.;

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Find related papers by JEL classification:
E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
O52 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Europe

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  2. Martin Feldstein, 1998. "The Political Economy of the European Economic and Monetary Union: Political Sources of an Economic Liability," NBER Working Papers 6150, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  4. Bhattacharya, Rina & Binner, Jane, 1998. "The Shocking Nature of Output Fluctuations in Some EU Countries," Applied Economics, Taylor and Francis Journals, vol. 30(8), pages 1101-25, August. [Downloadable!] (restricted)
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  6. Sims, Christopher A., 1992. "Interpreting the macroeconomic time series facts : The effects of monetary policy," European Economic Review, Elsevier, vol. 36(5), pages 975-1000, June. [Downloadable!] (restricted)
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  7. Maurice Obstfeld & Giovanni Peri, 1998. "Regional non-adjustment and fiscal policy," Economic Policy, CEPR, CES, MSH, vol. 13(26), pages 205-259, 04. [Downloadable!] (restricted)
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  9. Michael Bergman & Michael Hutchison, . "The Costs of EMU and Economic Convergence," EPRU Working Paper Series 98-16, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
  10. repec:pal:imfstp:v:45:y:1998:i:2:p:6 is not listed on IDEAS
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  11. Kumah, F.Y., 1996. "The effect of monetary policy on exchange rates : how to solve the puzzles," Discussion Paper 70, Tilburg University, Center for Economic Research. [Downloadable!]
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  13. Bernanke, Ben & Gertler, Mark, 1995. "Inside the Black Box: The Credit Channel of Monetary Policy Transmission," Working Papers 95-15, C.V. Starr Center for Applied Economics, New York University. [Downloadable!]
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  14. Garretsen, Harry & Swank, Job, 1998. "The Transmission of Interest Rate Changes and the Role of Bank Balance Sheets: A VAR-Analysis for the Netherlands," Journal of Macroeconomics, Elsevier, vol. 20(2), pages 325-339, April. [Downloadable!] (restricted)
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  16. Anil K. Kashyap & Jeremy C. Stein, 1997. "The role of banks in monetary policy: a survey with implications for the European Monetary Union," Economic Perspectives, Federal Reserve Bank of Chicago, issue Sep, pages 2-18. [Downloadable!]
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