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Dilemma of One Common Central Bank in a Heterogeneous Monetary Union

Author

Listed:
  • Menguy, Séverine

    () (Université de Paris X-Nanterre)

Abstract

The paper studies the appropriate weight that the central bank of a heterogeneous monetary union should give to each specific country. To stabilize symmetric shocks, the central bank should give a bigger weight to the countries where the rigidity in the labor market and the sensibility of the demand to the interest rate are the highest, whereas equally weighting each country is justified for asymmetric shocks. Moreover, the central bank should overweight the country which has a smaller preference for sustaining the economic activity and a higher preference for stabilizing public expenditures.

Suggested Citation

  • Menguy, Séverine, 2008. "Dilemma of One Common Central Bank in a Heterogeneous Monetary Union," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 23, pages 791-816.
  • Handle: RePEc:ris:integr:0454
    as

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    References listed on IDEAS

    as
    1. James J. Heckman & Carmen Pagés, 2004. "Law and Employment: Lessons from Latin America and the Caribbean," NBER Books, National Bureau of Economic Research, Inc, number heck04-1, January.
    2. Juan C. Botero & Simeon Djankov & Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer, 2004. "The Regulation of Labor," The Quarterly Journal of Economics, Oxford University Press, pages 1339-1382.
    3. Alvaro Forteza & Martín Rama, 2000. "Labor Market "Rigidity" and the Success of Economic Reforms Across more than One Hundred Countries," Documentos de Trabajo (working papers) 0600, Department of Economics - dECON.
    4. Collier, Paul & Dollar, David, 2002. "Aid allocation and poverty reduction," European Economic Review, Elsevier, vol. 46(8), pages 1475-1500, September.
    5. Matshe, Innocent & Young, Trevor, 2004. "Off-farm labour allocation decisions in small-scale rural households in Zimbabwe," Agricultural Economics, Blackwell, vol. 30(3), pages 175-186, May.
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    Cited by:

    1. BESSO, CHRISTOPHE RAOUL & chameni, celestin, 2016. "Analyse De La Vulnerabilite Macroeconomique De La Zone Franc
      [Analysis Of The Macroeconomic Vulnerability Of The Franc Zone]
      ," MPRA Paper 75143, University Library of Munich, Germany.

    More about this item

    Keywords

    monetary policy; monetary union; structural heterogeneity; heterogeneity in preferences;

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy

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