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

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  • 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.

Abstract

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 However, in a world with market imperfections, such arguments are no longer valid.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.

Suggested Citation

  • Ridhwan, M.M. & Nijkamp, P. & Rietveld, P., 2008. "Regional development and monetary policy : a review of the role of monetary unions, capital mobility and locational effects," Serie Research Memoranda 0007, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
  • Handle: RePEc:vua:wpaper:2008-7
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    Keywords

    Regional Finance; Monetary Union; Capital Mobility; Asymmetric Regional Finance; Monetary Union; Capital Mobility; Asymmetric; Information; Economic Geography;

    JEL classification:

    • R51 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Finance in Urban and Rural Economies
    • R58 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Regional Development Planning and Policy
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • F15 - International Economics - - Trade - - - Economic Integration

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