IDEAS home Printed from https://ideas.repec.org/a/pal/compes/v55y2013i3p387-403.html
   My bibliography  Save this article

EMU's Problems: Asymmetric Shocks or Asymmetric Behavior?

Author

Listed:
  • Andrea Boltho

    (Magdalen College, University of Oxford, High Street, Oxford, OX1 4AU, UK)

  • Wendy Carlin

    (University College London, Gower Street, London WC1E 6BT, UK)

Abstract

The early literature critical of the European Monetary Union feared the effects of asymmetric shocks on an area with little intercountry labor mobility and no common fiscal policy. Yet, asymmetric behavior, rather than asymmetric shocks, appears to be at the root of present difficulties. Peripheral countries have seen profligate public sectors incur large deficits and incautious private sectors incur large debts. In addition, wages in the Southern economies have grown more rapidly, and productivity more slowly, than in the North, storing up a medium-run competitiveness problem. Finally, governance standards, rather than converging, have diverged thus potentially jeopardizing the long-run aim of full political union. A plausible explanation for the failure of wage and governance behavior to converge is deep-seated differences in institutions, culture and trust. The potential for such cross-country differences to undermine the success of the Eurozone was neglected in the early analysis of the common currency area.

Suggested Citation

  • Andrea Boltho & Wendy Carlin, 2013. "EMU's Problems: Asymmetric Shocks or Asymmetric Behavior?," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 55(3), pages 387-403, September.
  • Handle: RePEc:pal:compes:v:55:y:2013:i:3:p:387-403
    as

    Download full text from publisher

    File URL: http://www.palgrave-journals.com/ces/journal/v55/n3/pdf/ces201244a.pdf
    File Function: Link to full text PDF
    Download Restriction: Access to full text is restricted to subscribers.

    File URL: http://www.palgrave-journals.com/ces/journal/v55/n3/full/ces201244a.html
    File Function: Link to full text HTML
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Andrea Ichino & Giovanni Maggi, 2000. "Work Environment and Individual Background: Explaining Regional Shirking Differentials in a Large Italian Firm," The Quarterly Journal of Economics, Oxford University Press, vol. 115(3), pages 1057-1090.
    2. Hans-Werner Sinn & Timo Wollmershäuser, 2012. "Target loans, current account balances and capital flows: the ECB’s rescue facility," International Tax and Public Finance, Springer;International Institute of Public Finance, pages 468-508.
    3. Luigi Guiso & Paolo Pinotti, 2012. "Democratization and Civic Capital," EIEF Working Papers Series 1202, Einaudi Institute for Economics and Finance (EIEF), revised Feb 2012.
    4. Luigi Guiso & Paola Sapienza & Luigi Zingales, 2004. "The cost of banking regulation," Proceedings 937, Federal Reserve Bank of Chicago.
    5. Wendy Carlin, 2013. "Real Exchange Rate Adjustment, Wage-Setting Institutions, and Fiscal Stabilization Policy: Lessons of the Eurozone's First Decade," CESifo Economic Studies, CESifo, pages 489-519.
    6. Fleming, J Marcus, 1971. "On Exchange Rate Unification," Economic Journal, Royal Economic Society, vol. 81(323), pages 467-488, September.
    7. Luigi Guiso & Paola Sapienza & Luigi Zingales, 2009. "Cultural Biases in Economic Exchange?," The Quarterly Journal of Economics, Oxford University Press, vol. 124(3), pages 1095-1131.
    8. Josef C Brada & Marcello Signorelli, 2012. "Comparing Labor Market Performance: Some Stylized Facts and Key Findings," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 54(2), pages 231-250, June.
    9. Maurizio Bovi & Laura Castellucci, 2001. "Cosa sappiamo dell'economia sommersa in Italia al di là dei luoghi comuni? Alcune proposizioni empiricamente fondate," ECONOMIA PUBBLICA, FrancoAngeli Editore, vol. 2001(6).
    Full references (including those not matched with items on IDEAS)

    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. "Systemic importance", "radical parties", and democracy in the Eurozone
      by Alberto Bagnai in Goofynomics on 2015-01-05 16:38:00

    More about this item

    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:pal:compes:v:55:y:2013:i:3:p:387-403. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sonal Shukla) or (Rebekah McClure). General contact details of provider: http://www.palgrave-journals.com/ .

    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 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 profile, as there may be some citations waiting for confirmation.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.