EconPapers    
Economics at your fingertips  
 

Monetary policy and the financial accelerator in a monetary union

Simon Gilchrist (), Jean-Olivier Hairault () and Hubert Kempf ()

No 750, International Finance Discussion Papers from Board of Governors of the Federal Reserve System (U.S.)

Abstract: In this paper, we consider the effect of a monetary union in a model with a significant role for financial market imperfections. We do so by introducing a financial accelerator into a stochastic general equilibrium macro model of a two country economy. We show that financial market imperfections introduce important cross-country transmission mechanisms to asymmetric shocks to supply and demand. Within this framework, we study the likely costs and benefits of monetary union. We also consider the effects of cross-country heterogeneity in financial markets. Both the presence of financial frictions and the use of a single currency have significant impacts on the international propagation of exogenous shocks. The introduction of asymmetries in the financial contract widens the difference in cyclical behavior of national economies in a monetary union, but financial integration compensates the loss of policy instruments.

Keywords: International finance; Monetary unions (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ifn and nep-mon
Date: 2002
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (40) Track citations by RSS feed

Downloads: (external link)
http://www.federalreserve.gov/pubs/ifdp/2002/750/default.htm (text/html)
http://www.federalreserve.gov/pubs/ifdp/2002/750/ifdp750.pdf (application/pdf)

Related works:
Working Paper: Monetary policy and the financial accelerator in a monetary union (2002) Downloads
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:fip:fedgif:750

Ordering information: This working paper can be ordered from
http://www.federalreserve.gov/pubs/ifdp/order.htm

Access Statistics for this paper

More papers in International Finance Discussion Papers from Board of Governors of the Federal Reserve System (U.S.) Contact information at EDIRC.
Bibliographic data for series maintained by Ryan Wolfslayer ().

 
Page updated 2019-12-02
Handle: RePEc:fip:fedgif:750