COORDINATION OF FISCAL POLICIES IN A MONETARY UNION

This paper examines how the member countries of a monetary union react to country-specific shocks and to shocks from the rest of the world, when the budget deficit is the only policy instrument available. We develop a three-country model in which countries show different preferences regarding objectives, and face asymmetric disturbances. Two of the countries form a monetary union where an independent central bank controls monetary policy, and fiscal policy is determined by fiscal authorities at the national level. In this framework, we analyze in strategic terms how authorities can deal with monetary, real and supply shocks using fiscal policy with stabilizing purposes. Finally, we discuss the welfare aspects of the optimal solution and extent to which a coordinate fiscal policy may influence the performance and evolution of the monetary union.Monetary union, fiscal policy, policy coordination

On the Desirability of Coordinated Supply-side Intervention: Does a Monetary Union Matter?

This paper examines the desirability of coordinated supply-side intervention within a monetary union, given the constraints on monetary and fiscal policy. The author considers an economic framework featuring independent monetary policy. In general, coordinated intervention is most useful against shocks that require distinct policy responses in each separate economy.monetary union, supply-side policies, policy coordination

On the Desirability of Supply-Side Intervention in a Monetary Union

This paper examines the desirability of supply-side intervention within a monetary union, given the constraints on monetary and fiscal policy, and compares it with an economic framework characterized by the independence of monetary policy. To this end, we first develop a simple two-country model in order to analyse in strategic terms how the authorities can deal with monetary, real and supply shocks, and the extent to which supply-side intervention may be useful to deal with these shocks. Next, we study whether the formation of a monetary union could be beneficial when there is coordination over labour market intervention.Monetary union, supply-side policies, policy coordination.

Foreign direct investment and regional growth: An analysis of the Spanish case

The massive increase in foreign direct investment (FDI) inflows following the Spanish integration with the now European Union (EU) in 1986, has been one of the most important features shaping the behaviour of the Spanish economy in the last twenty years. In this paper we will try to assess the impact of FDI on regional economic growth following Spain’s entry into the EU, using data for the 17 Spanish regions. The results support the important role played by FDI in promoting productivity growth, for those regions that received higher FDI inflows over the period analyzed.Economic growth, Foreign direct investment, Regions

Macroeconomics shocks in the Latin American Countries: implications on the economic and monetary integration

En este trabajo, estudiaremos la naturaleza de las perturbaciones que han sufrido los países Latinoamericanos (concretamente, CAN, Mercosur y Asociados) en dos periodos diferenciados: el anterior a la crisis económica desencadenada a finales de 2007 y el periodo posterior. Seguiremos el enfoque de Cohen y Wyplosz (1989) para analizar el carácter y la temporalidad de las perturbaciones que han afectado al PIB de dichos países. Nuestro objetivo último será determinar cuál ha sido el alcance de las perturbaciones, sus repercusiones en los procesos de integración y desarrollo económico, así como las implicaciones de cara a la eventual formación de una unión monetariaIn this paper we explore the nature of the shocks hitting the Latin American countries (i.e., CAN, Mercosur and Asociados) in two different periods: Before and after the economic crisis triggered by the end of 2007. We will follow the approach of Cohen and Wyplosz (1989) to analyse the nature and timing of the shocks that have affected the GDP of these countries. Our final aim would be to determine the scope of the disturbances, their impact on the integration processes and economic development, as well as the implications for the eventual formation of a monetary unio

VULNERABILITY TO SHOCKS IN EMU: 1991-2004

In this paper we analyze the nature of the shocks hitting the EMU member countries over the period 1991-2004, as well as for the two subperiods before and after 1999, i.e., the start of EMU. To this end, we first evaluate the relative importance of symmetric vs. asymmetric shocks, and then extract their temporary component. Our final aim would be assessing the vulnerability of the EMU countries to temporary and asymmetric shocks, which would be the most harmful case for the operation of a monetary union.Monetary union, EMU, asymmetric shocks, temporary shocks

INSURANCE MECHANISMS AGAINST ASYMMETRIC SHOCKS IN A MONETARY UNION: A PROPOSAL WITH AN APPLICATION TO EMU

In this paper we propose a simple, automatic insurance mechanism designed to cope with asymmetric shocks in a monetary union, which could be used as starting point of a more elaborated policy instrument. The mechanism would use as indicator of the occurrence of a shock the changes in the unemployment rate of the countries belonging to the union, and would be financed through a fund built from contributions of these countries as a percentage of their tax receipts. The fund would be distributed among the countries affected by a negative asymmetric shock according to the proportion in which every one of them would have been affected by the shock. Our proposal is illustrated by means of an empirical application to the case of EMU.Monetary union, asymmetric shocks, insurance function

CHARACTERIZING MACROECONOMIC SHOCKS IN THE CEECs

In this paper we analyze the nature of the shocks hitting the CEECs over the recent years. To this end, we first evaluate the relative importance of symmetric vs. asymmetric shocks, and then extract their temporary component. Our final aim would be assessing the vulnerability of the CEECs to temporary and asymmetric shocks, which would be the most harmful case for the operation of a monetary union. Finally, a comparison with the case of the current EMU members is also presented.Monetary union, Central and Eastern European countries, asymmetric shocks, temporary shocks

How useful are monetary policy rules to deal with inflation: The Spanish case.

The role of monetary policy rules to explain the behaviour of central banks has received an increasing attention during the last few years. The Spanish case could be of interest given that, with an inflation above the European average, was able to conduct its monetary policy and to control the inflation in order to join the European monetary union. But after the adoption of the European Central Bank’s monetary policy in January 1999, a higher inflation can be observed. In this paper we explore whether the monetary policy performed by the Bank of Spain would have follow a monetary policy rule, and to which extent monetary rules contribute to achieve the goal of inflation.Monetary policy rules, inflation.

Vulnerability to Shocks in EMU: 1991–2004 (in English)

The authors analyze the nature of economic shocks hitting European Economic and Monetary Union (EMU) member countries from 1991 to 2004, as well as for two sub-periods before and after the launch of EMU. To this end, they first evaluate the relative importance of symmetric versus asymmetric shocks, and then extract their temporary component. Their final aim would be assessing the vulnerability of EMU to transitory asymmetric shocks, that is, to the most harmful situation for the operation of a monetary union. Overall, the authors´ results show that in the period of analysis, symmetric shocks predominated over asymmetric shocks, but the temporary component of asymmetric shocks was higher than that of symmetric shocks.Monetary union, EMU, asymmetric shocks, temporary shocks