Helping with the Homework: Support Mechanisms for Uncertain Reforms in a Monetary Union

Carsten Hefeker

Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), 2019, vol. 239, issue 5-6, 983-1004

Abstract: A lack of structural reforms is often considered as a major problem in many member countries of EMU. This lack is arguably partly due to uncertainty about outcomes and a disregard for how policies spill over to other countries. Monetary union can reinforce this underprovision of structural reforms. Because centralization of structural policies is politically not feasible, I discuss subsidies for reforms and insurance against negative outcomes as alternative mechanisms that increase reform efforts. The paper derives the optimal use of those mechanisms and discusses their implementability.

Keywords: Monetary union; policy reforms; spillovers; uncertainty; subsidy; insurance (search for similar items in EconPapers)
JEL-codes: F33 F42 F45 H77 (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:jns:jbstat:v:239:y:2019:i:5-6:p:983-1004:n:1

DOI: 10.1515/jbnst-2018-0075

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