Monetary-fiscal policies design and financial shocks in currency unions

Capasso, Salvatore and Foresti, Pasquale (2024) Monetary-fiscal policies design and financial shocks in currency unions. Economia Politica, 41 (2). 439 - 455. ISSN 1120-2890

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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.

Item Type:	Article
Additional Information:	© 2024 The Author(s)
Divisions:	LSE
Subjects:	H Social Sciences > HG Finance H Social Sciences > HB Economic Theory
JEL classification:	E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E52 - Monetary Policy (Targets, Instruments, and Effects) E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy Formation, Macroeconomic Aspects of Public Finance, Macroeconomic Policy, and General Outlook > E61 - Policy Objectives; Policy Designs and Consistency; Policy Coordination F - International Economics > F3 - International Finance > F36 - Financial Aspects of Economic Integration
Date Deposited:	26 Jul 2024 10:36
Last Modified:	16 Nov 2024 02:48
URI:	http://eprints.lse.ac.uk/id/eprint/124371

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