Asymmetric shocks in a currency union with monetary and fiscal handcuffs?

Christopher Erceg and Jesper Lindé

No 1012, International Finance Discussion Papers from Board of Governors of the Federal Reserve System (U.S.)

Abstract: This paper investigates the impact of the asymmetric shocks within a currency union in a framework that takes account of the zero bound constraint on policy rates, and also allows for constraints on fiscal policy. In this environment, we document that the usual optimal currency argument showing that the effects of shocks are mitigated to the extent that they are common across member states can be reversed. Countries can be worse off when their neighbors experience similar shocks, including policy-driven reductions in government spending.

Keywords: Monetary policy; monetary unions; Fiscal policy (search for similar items in EconPapers)
Date: 2010
New Economics Papers: this item is included in nep-cba, nep-dge and nep-mon
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Citations: View citations in EconPapers (19)

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Related works:
Journal Article: Asymmetric Shocks in a Currency Union with Monetary and Fiscal Handcuffs (2011)
Chapter: Asymmetric Shocks in a Currency Union with Monetary and Fiscal Handcuffs (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgif:1012

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