IDEAS home Printed from https://ideas.repec.org/a/ris/ecoint/0369.html
   My bibliography  Save this article

Monetary Union of Small Open Economies: The Role of Trasparency Misperceptions

Author

Listed:

Abstract

The cross-country examination of monetary policy transparency scores, economic size and supply slopes produces no clear patterns for the empirical relations in question. This evidence prompts us to formulate a general setup for the study of currency union stabilization when there is monetary policy uncertainty and structural parameters may vary. For small open economies, small size is detrimental to the relative effectiveness of the single monetary policy, while a higher degree of openness yields results that depend on the specific shock considered. A steeper supply schedule hampers monetary union stabilization performance, except under output target shocks. A stronger reaction of aggregate demand to the interest rate is likewise detrimental, except in the event of supply disturbances. The welfare implications of the central bank preference for price stability are ambiguous. Keywords: Monetary Union; Small Open Economies; Asymmetric Information; Transparency JEL Classification: D82; E52; E58; F33; F41

Suggested Citation

  • Sánchez, Marcelo, 2009. "Monetary Union of Small Open Economies: The Role of Trasparency Misperceptions," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 62(4), pages 469-504.
  • Handle: RePEc:ris:ecoint:0369
    as

    Download full text from publisher

    File URL: http://www.iei1946.it/RePEc/ccg/SANCHEZ%20469_504.pdf
    File Function: Full text
    Download Restriction: no

    References listed on IDEAS

    as
    1. Gali­, Jordi & Monacelli, Tommaso, 2008. "Optimal monetary and fiscal policy in a currency union," Journal of International Economics, Elsevier, vol. 76(1), pages 116-132, September.
    2. Crowe, Christopher & Meade, Ellen E., 2008. "Central bank independence and transparency: Evolution and effectiveness," European Journal of Political Economy, Elsevier, vol. 24(4), pages 763-777, December.
    3. Laurence M. Ball, 1999. "Policy Rules for Open Economies," NBER Chapters,in: Monetary Policy Rules, pages 127-156 National Bureau of Economic Research, Inc.
    4. Volker Hahn, 2009. "Transparency of Central Bank Preferences," German Economic Review, Verein für Socialpolitik, vol. 10, pages 32-49, February.
    5. Michele Ca’ Zorzi & Elke Hahn & Marcelo Sánchez, 2007. "Exchange Rate Pass-Through in Emerging Markets," The IUP Journal of Monetary Economics, IUP Publications, vol. 0(4), pages 84-102, November.
    6. Eijffinger, Sylvester C W & Hoeberichts, Marco & Schaling, Eric, 2000. "Why Money Talks and Wealth Whispers: Monetary Uncertainty and Mystique," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 32(2), pages 218-235, May.
    7. Petra M. Geraats, 2007. "The Mystique of Central Bank Speak," International Journal of Central Banking, International Journal of Central Banking, vol. 3(1), pages 37-80, March.
    8. Claudio E. V. Borio & Andrew Filardo, 2007. "Globalisation and inflation: New cross-country evidence on the global determinants of domestic inflation," BIS Working Papers 227, Bank for International Settlements.
    9. Orphanides, Athanasios, 2003. "Monetary policy evaluation with noisy information," Journal of Monetary Economics, Elsevier, vol. 50(3), pages 605-631, April.
    10. Alesina, Alberto & Spolaore, Enrico & Wacziarg, Romain, 2005. "Trade, Growth and the Size of Countries," Handbook of Economic Growth,in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 23, pages 1499-1542 Elsevier.
    11. S[empty]rensen, Jan Rose, 1991. "Political uncertainty and macroeconomic performance," Economics Letters, Elsevier, vol. 37(4), pages 377-381, December.
    12. Broadbent, Ben & Barro, Robert J., 1997. "Central bank preferences and macroeconomic equilibrium," Journal of Monetary Economics, Elsevier, vol. 39(1), pages 17-43, June.
    13. Marcelo Sánchez, 2008. "Implications of Monetary Union for Catching-up Member States," Open Economies Review, Springer, vol. 19(3), pages 371-390, July.
    14. N. Nergiz Dincer & Barry Eichengreen, 2007. "Central Bank Transparency: Where, Why, and with What Effects?," NBER Working Papers 13003, National Bureau of Economic Research, Inc.
    15. Bijsterbosch, Martin & Beirne, John, 2009. "Exchange Rate Pass-through in Central and Eastern European Member States," Working Paper Series 1120, European Central Bank.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Monetary Union; Small Open Economies; Asymmetric Information; Transparency;

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

    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:ris:ecoint:0369. 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: (Angela Procopio). General contact details of provider: http://edirc.repec.org/data/cacogit.html .

    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 RePEc Author Service 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.