Monetary Policies in the Presence of Asymmetries

Paul De Grauwe

Journal of Common Market Studies, 2000, vol. 38, issue 4, 593-612

Abstract: In this article we study the theory of monetary policy when the monetary authority faces asymmetries in the countries constituting the monetary union. We identify two asymmetries (shocks and transmission) in the context of a two‐country model. A general finding is that, as the degree of asymmetries increases, the effectiveness of stabilization of output and unemployment is reduced. As a result, when asymmetries increase, the stabilization effort of the central bank declines for given preferences about stabilization. We also find that the central bank can improve the efficiency of its monetary policies when asymmetries in the transmission exist, by using national information in the setting of optimal policies. The declared strategy of the ECB conflicts with this prescription. However, in practice the ECB is likely to follow this prescription.

Date: 2000
References: Add references at CitEc
Citations: View citations in EconPapers (67)

Downloads: (external link)
https://doi.org/10.1111/1468-5965.00255

Related works:
Working Paper: Monetary Policies In The Presence Of Asymmetries (2000)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:jcmkts:v:38:y:2000:i:4:p:593-612

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0021-9886

Access Statistics for this article

Journal of Common Market Studies is currently edited by Jim Rollo and Daniel Wincott

More articles in Journal of Common Market Studies from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().