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EMU stability: Direct and indirect risk sharing

Paolo Canofari (), Giovanni Di Bartolomeo () and Messori Marcello

wp.comunite from Department of Communication, University of Teramo

Abstract: Our paper aims to analyze the effectiveness of different risk-sharing mechanisms in providing stability to a monetary union. We select two stylized tools with extreme and opposite features. The first is an expansionary but conventional monetary policy that is used to help EMU’s most fragile member states manage their public debts; the second is a centralized fiscal policy that allows for the transfer of a portion of these public debts from EMU’s most fragile member states to those considered EMU’s “core”. By a stylized periphery-core model of a monetary union, we compare the strengths and weaknesses of these two tools in order to reach some welfare implications in terms of union stability.

New Economics Papers: this item is included in nep-eec and nep-mon
Date: 2017-11
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