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Monetary-fiscal policies design and financial shocks in currency unions

Author

Listed:
  • Salvatore Capasso

    (University of Naples Parthenope and CNR)

  • Pasquale Foresti

    (University of Roehampton London and The London School of Economics)

Abstract

This paper analyzes the design of monetary and fiscal policies in a currency union by focusing on the capacity to react to symmetric and asymmetric financial shocks. The model is constructed in order to mimic the institutional design adopted for the policy making in the EMU. The paper shows how a currency union set-up like the one adopted by the EMU can easily cope with symmetric financial shocks. However, it shows how in the face of asymmetric shocks more space for fiscal interventions is crucial, especially in more peripheral member countries.

Suggested Citation

  • Salvatore Capasso & Pasquale Foresti, 2024. "Monetary-fiscal policies design and financial shocks in currency unions," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 41(2), pages 439-455, July.
    • Handle: RePEc:spr:epolit:v:41:y:2024:i:2:d:10.1007_s40888-024-00337-y
    DOI: 10.1007/s40888-024-00337-y
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    References listed on IDEAS

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    More about this item

    Keywords

    Monetary union; Monetary-fiscal policy; EMU; Financial shocks;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration

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