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European Monetary Union, Asymmetric Shocks and Inertia

Author

Listed:
  • Driver, Rebecca
  • Wren-Lewis, Simon

Abstract

This paper assesses the scale of the costs of European Monetary Union when shocks are asymmetric. This is done considering time consistent policies within a small theoretical two country model, with parameter values chosen from empirical work. The model builds on earlier work by incoporating a forward looking inflation mechanism. Our results suggest that there are significant costs associated with Monetary Union, particularly when fiscal policy is not used as a stabilisation tool.

Suggested Citation

  • Driver, Rebecca & Wren-Lewis, Simon, 1996. "European Monetary Union, Asymmetric Shocks and Inertia," Discussion Papers 9607, University of Exeter, Department of Economics.
    • Handle: RePEc:exe:wpaper:9607
    as

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    More about this item

    Keywords

    European Monetary Union; Asymmetric shocks; Inertia;
    All these keywords.

    JEL classification:

    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission

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