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Regional development and monetary policy : a review of the role of monetary unions, capital mobility and locational effects

  • Ridhwan, M.M.

    (Vrije Universiteit Amsterdam, Faculteit der Economische Wetenschappen en Econometrie (Free University Amsterdam, Faculty of Economics Sciences, Business Administration and Economitrics)

  • Nijkamp, P.
  • Rietveld, P.

Standard economic theory assumes money to be neutral, at least in the long run, driven by interregional arbitrage and perfect capital mobility. This may easily be used as a justification for regional economists to ignore monetary factors. However, in a world with market imperfections, such arguments are no longer valid. This paper provides a critical review of theoretical arguments and empirical evidence on the issue. Special attention is devoted to asymmetric information problems caused by geographical factors. We conclude that monetary policy and financial markets can have a potentially important role to play in promoting regional development especially in less-developed countries.

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Paper provided by VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics in its series Serie Research Memoranda with number 0007.

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Date of creation: 2008
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Handle: RePEc:vua:wpaper:2008-7
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