IDEAS home Printed from https://ideas.repec.org/a/ers/journl/vviiiy2005i3-4p3-20.html
   My bibliography  Save this article

Asymmetric Shocks, Structural Rigidities and Adjustment Capability in EMU - A Review

Author

Listed:
  • Sotiris Theodoropoulos

Abstract

The high degree of sustainable nominal convergence between EMU member states have not implied a corresponding degree of real and structural convergence. Still existing structural asymmetries in the monetary union, which is not an Optimum Currency Area, are bound to broaden due to continuous enlargement of Europe, giving rise to various kinds of shocks and divergences, poor economic performance in some member countries and to Europe as a whole. This paper examines the potential sources of asymmetries, which to a large extend determine the exposure to asymmetric shocks, or asymmetrical effects stemming from symmetric shocks. We also analyze available adjustment mechanisms and appropriate policy instruments in EMU’s economic reality. Using a set of economic indicators we investigate how some product and labor market rigidities affect in an adverse way macroeconomic performance in EMU. Having restricted the fiscal room for maneuver under the Stability and Growth Pact, existing asymmetries and structural rigidities call for a speed-up of structural reforms, as the only way to growth and prosperity.

Suggested Citation

  • Sotiris Theodoropoulos, 2005. "Asymmetric Shocks, Structural Rigidities and Adjustment Capability in EMU - A Review," European Research Studies Journal, European Research Studies Journal, vol. 0(3-4), pages 3-20.
    • Handle: RePEc:ers:journl:v:viii:y:2005:i:3-4:p:3-20
    as

    Download full text from publisher

    File URL: http://www.ersj.eu/repec/ers/papers/05_p1.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Paul Conway & Véronique Janod & Giuseppe Nicoletti, 2005. "Product Market Regulation in OECD Countries: 1998 to 2003," OECD Economics Department Working Papers 419, OECD Publishing.
    2. Hughes Hallett, Andrew & Viegi, Nicola, 2001. "Labour Market Reform and Monetary Policy in EMU: Do Asymmetries Matter?," CEPR Discussion Papers 2979, C.E.P.R. Discussion Papers.
    3. Blanchard, Olivier & Wolfers, Justin, 2000. "The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence," Economic Journal, Royal Economic Society, vol. 110(462), pages 1-33, March.
    4. André Sapir & Marco Buti, 1998. "Economic policy in EMU," ULB Institutional Repository 2013/8078, ULB -- Universite Libre de Bruxelles.
    5. Andrew Hughes Hallett & Laura Piscitelli, 1999. "EMU in Reality: The Effect of a Common Monetary Policy on Economies with Different Transmission Mechanisms," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 26(4), pages 337-358, December.
    6. Wyplosz, Charles, 1989. "Asymmetry in the EMS: Intentional or systemic?," European Economic Review, Elsevier, vol. 33(2-3), pages 310-320, March.
    7. Marco Buti & André Sapir (ed.), 2002. "EMU and Economic Policy in Europe," Books, Edward Elgar Publishing, number 2871, December.
    8. Buti, Marco & Franco, Daniele & Ongena, Hedwig, 1998. "Fiscal Discipline and Flexibility in EMU: The Implementation of the Stability and Growth Pact," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 14(3), pages 81-97, Autumn.
    9. Driver, Rebecca L & Wren-Lewis, Simon, 1999. "European Monetary Union and Asymmetric Shocks in a New Keynesian Model," Oxford Economic Papers, Oxford University Press, vol. 51(4), pages 665-688, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. A D Adom, 2016. "Resilience of developing countries to shocks: Case study of WAEMU countries with SUR and VAR Approaches," Economic Issues Journal Articles, Economic Issues, vol. 21(2), pages 105-138, September.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Martin Larch & Paul van den Noord & Lars Jonung, 2010. "The Stability and Growth Pact: Lessons from the Great Recession," European Economy - Economic Papers 2008 - 2015 429, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    2. van Aarle, B. & Di Bartolomeo, G. & Engwerda, J.C. & Plasmans, J.E.J., 2001. "Monetary and fiscal policy design in the EMU using a dynamic game approach : An overview," Other publications TiSEM 355822b0-4ad6-4792-b0d6-7, Tilburg University, School of Economics and Management.
    3. Alison Johnston, 2011. "The Revenge of Baumol's Cost Disease?: Monetary Union and the Rise of Public Sector Wage Inflation," LEQS – LSE 'Europe in Question' Discussion Paper Series 32, European Institute, LSE.
    4. Lorenzo Forni & Sandro Momigliano, 2004. "Cyclical sensitivity of fiscal policies based on real-time data," Temi di discussione (Economic working papers) 540, Bank of Italy, Economic Research and International Relations Area.
    5. Boeri, Tito & Macis, Mario, 2008. "Do Unemployment Benefits Promote or Hinder Structural Change?," IZA Discussion Papers 3371, Institute of Labor Economics (IZA).
    6. Bas van Aarle & Giovanni Di Bartolomeo & Jacob Engwerda & Joseph Plasmans, 2002. "Monetary and Fiscal Policy Design in the EMU: An Overview," Open Economies Review, Springer, vol. 13(4), pages 321-340, October.
    7. Elisabetta Croci Angelini & Francesco Farina, 2007. "Wage Inequality in Europe: the Role of Labour Market and Redistributive Institutions," AIEL Series in Labour Economics, in: Nicola Acocella & Riccardo Leoni (ed.), Social Pacts, Employment and Growth, chapter 9, pages 195-217, Springer.
    8. Johnston, Alison, 2011. "The revenge of Baumol's cost disease?: monetary union and the rise of public sector wage inflation," LSE Research Online Documents on Economics 53280, London School of Economics and Political Science, LSE Library.
    9. Jorg Bibow, 2004. "Fiscal Consolidation: Contrasting Strategies & Lessons From International Experiences," Economics Working Paper Archive wp_400, Levy Economics Institute.
    10. Mr. Roel M. W. J. Beetsma & Mr. Xavier Debrun & Mr. Franc Klaassen, 2001. "Is Fiscal Policy Coordination in EMU Desirable?," IMF Working Papers 2001/178, International Monetary Fund.
    11. Niels D. Gilbert & Jasper F.M. Jong, 2017. "Do European fiscal rules induce a bias in fiscal forecasts? Evidence from the Stability and Growth Pact," Public Choice, Springer, vol. 170(1), pages 1-32, January.
    12. COMBEY, Adama & NUBUKPO, Kako, 2013. "Coordination des Politiques Economiques au Sein de la Zone UEMOA : Bilan et Perspectives [Economic Policy Coordination in the WAEMU: Results and Prospects]," MPRA Paper 58118, University Library of Munich, Germany, revised Aug 2014.
    13. Frankel, Jeffrey A. & Schreger, Jesse, 2012. "Over-Optimistic Official Forecasts in the Eurozone and Fiscal Rules," Working Paper Series rwp12-041, Harvard University, John F. Kennedy School of Government.
    14. Dury, Karen & Pina, Alvaro M., 2003. "Fiscal policy in EMU: simulating the operation of the Stability Pact," Journal of Policy Modeling, Elsevier, vol. 25(2), pages 179-206, February.
    15. Andrea Colciago & Tiziano Ropele & V. Anton Muscatelli & Patrizio Tirelli, 2008. "The Role of Fiscal Policy in a Monetary Union: are National Automatic Stabilizers Effective?," Review of International Economics, Wiley Blackwell, vol. 16(3), pages 591-610, August.
    16. Leopold Diebalek & Doris Prammer, 2006. "Reform of the Stability and Growth Pact," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue 1, pages 78-109.
    17. Christopher Allsopp, 2002. "The Future of Macroeconomic Policy in the European Union," Discussion Papers 07, Monetary Policy Committee Unit, Bank of England.
    18. Tito Boeri & J. Ignacio Conde-Ruiz & Vincenzo Galasso, "undated". "Cross-skill Redistribution and the Tradeoff between Unemployment Benefits and Employment Protection," Working Papers 2004-26, FEDEA.
    19. Fabrizio Balassone & Maura Francese & Stefania Zotteri, 2010. "Cyclical asymmetry in fiscal variables in the EU," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 37(4), pages 381-402, November.
    20. repec:got:cegedp:40 is not listed on IDEAS
    21. Gatti, Donatella & van Wijnbergen, Christa, 1999. "The case for a symmetric reaction function of the European Central Bank," Discussion Papers, Research Unit: Economic Change and Employment FS I 99-305, WZB Berlin Social Science Center.

    More about this item

    Keywords

    EMU; optimum currency areas; asymmetries; asymmetric shocks; adjustment capability; product and labor market regulation;
    All these keywords.

    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • K20 - Law and Economics - - Regulation and Business Law - - - General
    • L43 - Industrial Organization - - Antitrust Issues and Policies - - - Legal Monopolies and Regulation or Deregulation
    • L5 - Industrial Organization - - Regulation and Industrial Policy

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ers:journl:v:viii:y:2005:i:3-4:p:3-20. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Marios Agiomavritis (email available below). General contact details of provider: https://ersj.eu/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.