Insurance Mechanisms against Asymmetric Shocks in a Monetary Union: a Proposal with an Application to EMU

Oscar Bajo-Rubio () and Carmen Diaz-Roldan ()

No 2003013, Discussion Papers (REL - Recherches Economiques de Louvain) from Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES)

Abstract: In this paper we propose a simple, automatic insurance mechanism designed to cope with asymmetric shocks in a monetary union, which could be used as starting point of a more elaborated policy instrument. The mechanism would use as indicator of the occurrence of a shock the changes in the unemployment rate of the countries belonging to the union, and would be financed through a fund built from contributions of these countries as a percentage of their tax receipts. The fund would be distributed among the countries affected by a nŽgative asymmetric shock according to the proportion in which every one of them would h‰ve been affected by the shock. Our proposai is illustrated by means of an empirical application to the case of EMU.

Keywords: Monetary union; asymmetric shocks; insurance function (search for similar items in EconPapers)
JEL-codes: E62 E63 (search for similar items in EconPapers)
Date: 2003-03-01
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Working Paper: Insurance Mechanisms Against Asymmetric Shocks in a Monetary Union: A Proposal with an Application to EMU
Journal Article: Insurance Mechanisms against Asymmetric Shocks in a Monetary Union a Proposal with an Application to EMU (2003)
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