Assessing the Effects of Financial Heterogeneity in a Monetary Union : A DSGE Approach
The aim of this article is to analyze how financial heterogeneity can accentuate the cyclical divergences inside a monetary union that faces technological, monetary and financial shocks. To this purpose, this study relies on a two-country Dynamic Stochastic General Equilibrium model, where the two countries are supposed to be differently sensitive to the bank capital channel. The model allows us to demonstrate how a given symmetric shock causes cyclical divergences inside a heterogeneous monetary union. On this point, it allows reproducing some stylized facts recently observed in the UE. Moreover, it appears that the more heterogeneous the union, the larger the effects of financial asymmetries on the transmission of shocks. Finally, we show that a common monetary policy contributes to worsen cyclical divergences, in comparison with monetary policies that would be nationally conducted.
|Date of creation:||Mar 2011|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://lare-efi.u-bordeaux4.fr/
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.:
- Angeloni, Ignazio & Ehrmann, Michael, 2004.
"Euro area inflation differentials,"
Working Paper Series
0388, European Central Bank.
- Meh, Césaire A. & Moran, Kevin, 2010.
"The role of bank capital in the propagation of shocks,"
Journal of Economic Dynamics and Control,
Elsevier, vol. 34(3), pages 555-576, March.
- Césaire Meh & Kevin Moran, 2008. "The Role of Bank Capital in the Propagation of Shocks," Working Papers 08-36, Bank of Canada.
- Fagan, Gabriel & Henry, Jérôme & Mestre, Ricardo, 2001. "An area-wide model (AWM) for the euro area," Working Paper Series 0042, European Central Bank.
- Jondeau, E. & Sahuc, J-G., 2007.
"Testing heterogeneity within the euro area,"
181, Banque de France.
- Ester Faia, 2004.
"Monetary policy in a world with different financial systems,"
Money Macro and Finance (MMF) Research Group Conference 2003
28, Money Macro and Finance Research Group.
- Faia, Ester, 2002. "Monetary policy in a world with different financial systems," Working Paper Series 0183, European Central Bank.
- Florina-Cristina Badarau & Grégory Levieuge, 2010.
"Assessing the Potential Strength of a Bank Capital Channel in Europe: A Principal Component Analysis,"
- Cristina Badarau-Semenescu, & Gregory Levieuge, 2010. "Assessing the Potential Strength of a Bank Capital Channel in Europe: A Principal Component Analysis," The Review of Finance and Banking, Academia de Studii Economice din Bucuresti, Romania / Facultatea de Finante, Asigurari, Banci si Burse de Valori / Catedra de Finante, vol. 2(1), pages 005-016, June.
- Simon Gilchrist & Jean-Olivier Hairault & Hubert Kempf, 2002.
"Monetary policy and the financial accelerator in a monetary union,"
International Finance Discussion Papers
750, Board of Governors of the Federal Reserve System (U.S.).
- Kempf, Hubert & Gilchrist, Simon & Hairault, Jean-Olivier, 2002. "Monetary policy and the financial accelerator in a monetary union," Working Paper Series 0175, European Central Bank.
- Skander Van den Heuvel, 2006. "The Bank Capital Channel of Monetary Policy," 2006 Meeting Papers 512, Society for Economic Dynamics.
- Robert Townsend, 1979.
"Optimal contracts and competitive markets with costly state verification,"
45, Federal Reserve Bank of Minneapolis.
- Townsend, Robert M., 1979. "Optimal contracts and competitive markets with costly state verification," Journal of Economic Theory, Elsevier, vol. 21(2), pages 265-293, October.
- Sevestre, Patrick & Martinez-Pages, Jorge & Gambacorta, Leonardo & Ehrmann, Michael & Worms, Andreas, 2001.
"Financial systems and the role of banks in monetary policy transmission in the euro area,"
Discussion Paper Series 1: Economic Studies
2001,18, Deutsche Bundesbank, Research Centre.
- Ehrmann, Michael & Gambacorta, Leonardo & Martinéz Pagés, Jorge & Sevestre, Patrick & Worms, Andreas, 2001. "Financial systems and the role of banks in monetary policy transmission in the euro area," Working Paper Series 0105, European Central Bank.
- Michael Ehrmann & Leonardo Gambacorta & Jorge Martï¿½nez-Pagï¿½s & Patrick Sevestre & Andreas Worms, 2001. "Fynancial Systems and the Role of Banks in Monetary Policy Transmission in the Euro area," Temi di discussione (Economic working papers) 432, Bank of Italy, Economic Research and International Relations Area.
- Michael Ehrmann & Leonardo Gambacorta & Jorge Martínez-Pagés & Patrick Sevestre & Andreas Worms, 2001. "Financial Systems and the Role of Banks in Monetary Policy Transmission in the Euro Area," Banco de Espa�a Working Papers 0118, Banco de Espa�a.
- Mehmet Fatih Ekinci & Sebnem Kalemli-Ozcan & Bent Sorensen, 2007.
"Financial Integration within EU Countries: The Role of Institutions, Confidence and Trust,"
NBER Working Papers
13440, National Bureau of Economic Research, Inc.
- Mehmet Fatih Ekinci & Şebnem Kalemli-Özcan & Bent E. Sørensen, 2009. "Financial Integration within EU Countries: The Role of Institutions, Confidence and Trust," NBER Chapters, in: NBER International Seminar on Macroeconomics 2007, pages 325-391 National Bureau of Economic Research, Inc.
- Jean-Bernard Chatelain & Andrea Generale & Philip Vermeulen & Michael Ehrmann & Jorge Martínez-Pagés & Andreas Worms, 2003.
"Monetary policy transmission in the euro area: New evidence from micro data on firms and banks,"
Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers)
- Jean-Bernard Chatelain & Michael Ehrmann & Andrea Generale & Jorge Martínez-Pagés & Philip Vermeulen & Andreas Worms, 2003. "Monetary Policy Transmission in the Euro Area: New Evidence From Micro Data on Firms and Banks," Journal of the European Economic Association, MIT Press, vol. 1(2-3), pages 731-742, 04/05.
- Gambacorta, Leonardo & Mistrulli, Paolo Emilio, 2004. "Does bank capital affect lending behavior?," Journal of Financial Intermediation, Elsevier, vol. 13(4), pages 436-457, October.
- Hofmann, Boris & Remsperger, Hermann, 2005. "Inflation differentials among the Euro area countries: Potential causes and consequences," Journal of Asian Economics, Elsevier, vol. 16(3), pages 403-419, June.
- Joe Peek & Eric S. Rosengren & Geoffrey M. B. Tootell, 2000.
"Identifying the macroeconomic effect of loan supply shocks,"
00-2, Federal Reserve Bank of Boston.
- Peek, Joe & Rosengren, Eric S & Tootell, Geoffrey M B, 2003. " Identifying the Macroeconomic Effect of Loan Supply Shocks," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 35(6), pages 931-46, December.
- PEEK Joe & M.B. TOOTELL Geoffrey & ROSENGREN Eric S., . "Identifying the Macroeconomic Effect of Loan Supply Shocks," EcoMod2003 330700118, EcoMod.
- Kh. Sekkat & J.Malek Mansour, 2005. "Exchange Rate Fluctuations, Trade and Asymmetric Shocks in the Economic and Monetary Union," International Finance, Wiley Blackwell, vol. 8(1), pages 119-137, 07.
- Blum, Jurg & Hellwig, Martin, 1995. "The macroeconomic implications of capital adequacy requirements for banks," European Economic Review, Elsevier, vol. 39(3-4), pages 739-749, April.
- Grégory Levieuge, 2009.
"The Bank Capital Channel and Counter-Cyclical Prudential Regulation in a DSGE model,"
Recherches économiques de Louvain,
De Boeck Université, vol. 75(4), pages 425-460.
- Gregory Levieuge, 2009. "The Bank Capital Channel and Counter-Cyclical Prudential Regulation in a DGSE Model," Discussion Papers (REL - Recherches Economiques de Louvain) 2009042, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
- Philip R. Lane, 2006. "The Real Effects of European Monetary Union," Journal of Economic Perspectives, American Economic Association, vol. 20(4), pages 47-66, Fall.
- Chen, Nan-Kuang, 2001. "Bank net worth, asset prices and economic activity," Journal of Monetary Economics, Elsevier, vol. 48(2), pages 415-436, October.
- Calvo, Guillermo A., 1983. "Staggered prices in a utility-maximizing framework," Journal of Monetary Economics, Elsevier, vol. 12(3), pages 383-398, September.
When requesting a correction, please mention this item's handle: RePEc:laf:wpaper:cr1108. 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: (Cyril Mesmer)
If references are entirely missing, you can add them using this form.