Monetary-fiscal policies design and financial shocks in currency unions

Salvatore Capasso () and Pasquale Foresti ()
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Salvatore Capasso: University of Naples Parthenope and CNR
Pasquale Foresti: University of Roehampton London and The London School of Economics

Economia Politica: Journal of Analytical and Institutional Economics, 2024, vol. 41, issue 2, No 6, 439-455

Abstract: 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: Monetary union; Monetary-fiscal policy; EMU; Financial shocks (search for similar items in EconPapers)
JEL-codes: E52 E61 F33 F36 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s40888-024-00337-y

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