Markets Integration and Macroeconomic Dispersion in a Monetary Union
Using a two country DGSE combining nominal rigidities and financial frictions, we show that the persistence of output and inflation asymmetries observed since 1999 in an increasingly integrated EMU is not necessarily puzzling. Only the integration of final goods markets unambiguously leads to a reduction of asymmetries while the integration of final goods markets and the integration of financial markets increase the dispersion of inflation rates and business cycles. The result builds on the intensive use of financial markets, i.e. the current account, to adjust externally and smooth the consequences of asymmetric shocks. This mechanism implies a disconnection of country-level outputs and /or inflation rates to ensure that agents return to their initial asset position in the long run.
|Date of creation:||01 Mar 2010|
|Contact details of provider:|| Postal: Place Montesquieu 3, 1348 Louvain-la-Neuve (Belgium)|
Fax: +32 10473945
Web page: http://www.uclouvain.be/ires
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Camacho, Maximo & Pérez-Quirós, Gabriel & Sáiz Matute, Lorena, 2005.
"Are European Business Cycles Close Enough to be Just One?,"
CEPR Discussion Papers
4824, C.E.P.R. Discussion Papers.
- Camacho, Maximo & Perez-Quiros, Gabriel & Saiz, Lorena, 2006. "Are European business cycles close enough to be just one?," Journal of Economic Dynamics and Control, Elsevier, vol. 30(9-10), pages 1687-1706.
- Maximo Camacho & Gabriel Perez-Quiros, 2004. "Are European business cycles close enough to be just one?," Computing in Economics and Finance 2004 16, Society for Computational Economics.
- Máximo Camacho & Gabriel Pérez-Quirós & Lorena Saiz, 2004. "Are european business cycles close enough to be just one?," Working Papers 0408, Banco de España;Working Papers Homepage.
- Jean-Olivier Hairault, 2002. "Labor-Market Search and International Business Cycles," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 5(3), pages 535558-5355, July.
- Paul de Grauwe & Francesco Paolo Mongelli, 2005.
"Endogeneities of Optimum Currency Areas: What brings Countries Sharing a Single Currency Closer together?,"
Working Papers de Economia (Economics Working Papers)
29, Departamento de Economia, Gestão e Engenharia Industrial, Universidade de Aveiro.
- De Grauwe, Paul & Mongelli, Francesco Paolo, 2005. "Endogeneities of optimum currency areas: what brings countries sharing a single currency closer together?," Working Paper Series 0468, European Central Bank.
- Pierpaolo Benigno & Michael Woodford, 2005.
"Inflation Stabilization And Welfare: The Case Of A Distorted Steady State,"
Journal of the European Economic Association,
MIT Press, vol. 3(6), pages 1185-1236, December.
- Pierpaolo Benigno & Michael Woodford, 2004. "Inflation Stabilization and Welfare: The Case of a Distorted Steady State," NBER Working Papers 10838, National Bureau of Economic Research, Inc.
- Michael Woodford & Pierpaolo Benigno, 2004. "Inflation Stabilization and Welfare: The Case of a Distorted Steady State," 2004 Meeting Papers 481, Society for Economic Dynamics.
- Benigno, Pierpaolo, 2001.
"Optimal Monetary Policy in a Currency Area,"
CEPR Discussion Papers
2755, C.E.P.R. Discussion Papers.
- Harris Dellas & George Tavlas, 2005.
"Wage Rigidity and Monetary Union,"
Royal Economic Society, vol. 115(506), pages 907-927, October.
- Harris Dellas & George Tavlas, 2004. "Wage Rigidity and Monetary Union," Working Papers 12, Bank of Greece.
- Dellas, Harris & Tavlas, George, 2003. "Wage Rigidity and Monetary Union," CEPR Discussion Papers 3679, C.E.P.R. Discussion Papers.
- Harris Dellas & George Tavlas, 2002. "Wage Rigidity and Monetary Union," Diskussionsschriften dp0219, Universitaet Bern, Departement Volkswirtschaft.
When requesting a correction, please mention this item's handle: RePEc:ctl:louvre:2010011. 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: (Sebastien SCHILLINGS)
If references are entirely missing, you can add them using this form.