Markets Integration and Macroeconomic Dispersion in a Monetary Union
Eyquem, Aurélien
Markets Integration and Macroeconomic Dispersion in a Monetary Union - 2010.
60
Using a general equilibrium model which combines nominal rigidities and financial imperfections, we will show how the persistence of output and inflation asymmetries observed since 1999 in an increasingly integrated EMU is not necessarily paradoxical. Based on our results, only a better integration of the production processes significantly leads to a reduction of business cycles and inflation rates. A better integration of the goods and services markets and integration of financial markets encourages economies to adjust more strongly, through current accounts, to asymmetric shocks. This mechanism tends to increase the dispersion of business cycles and inflation rates among member countries, which enables them to remain within their intertemporal budget constraints.
Markets Integration and Macroeconomic Dispersion in a Monetary Union - 2010.
60
Using a general equilibrium model which combines nominal rigidities and financial imperfections, we will show how the persistence of output and inflation asymmetries observed since 1999 in an increasingly integrated EMU is not necessarily paradoxical. Based on our results, only a better integration of the production processes significantly leads to a reduction of business cycles and inflation rates. A better integration of the goods and services markets and integration of financial markets encourages economies to adjust more strongly, through current accounts, to asymmetric shocks. This mechanism tends to increase the dispersion of business cycles and inflation rates among member countries, which enables them to remain within their intertemporal budget constraints.
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