Monetary-fiscal policies design and financial shocks in currency unions

Salvatore Capasso and Pasquale Foresti

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: This paper analyzes the design of monetary and fiscal policies in a currency union by focusing on the capacity to react to symmetric and asymmetric financial shocks. The model is constructed in order to mimic the institutional design adopted for the policy making in the EMU. The paper shows how a currency union set-up like the one adopted by the EMU can easily cope with symmetric financial shocks. However, it shows how in the face of asymmetric shocks more space for fiscal interventions is crucial, especially in more peripheral member countries.

Keywords: financial shocks; monetary union; monetary-fiscal policy; EMU (search for similar items in EconPapers)
JEL-codes: E52 E61 F36 (search for similar items in EconPapers)
Pages: 17 pages
Date: 2024-07-18
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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Published in Economia Politica, 18, July, 2024, 41(2), pp. 439 - 455. ISSN: 1120-2890

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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:124371

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