{"title":"Stabilization of supply shocks in a structurally heterogeneous monetary union✰","authors":"Séverine MENGUY","doi":"10.1016/j.rie.2023.06.005","DOIUrl":null,"url":null,"abstract":"<div><p>The paper provides accurate theoretical results regarding the consequences of heterogeneities between the preferences or between the structural parameters of the member countries of a monetary union on monetary and fiscal policies, and on the stabilization of economic activity and inflation, in case of supply shocks. Economic activity and inflation are higher (smaller) in a country affected by a positive (negative) symmetric or asymmetric supply shock, despite the more contractionary (expansionary) fiscal policy in this country. In this context, we find that monetary unification could be more painful for a country with a small preference for stabilizing the budget deficit or economic activity, and on the contrary with a high preference for stabilizing inflation. Besides, regarding structural heterogeneities, monetary unification could be more painful for a country with strong transmission mechanisms of monetary policy or with a small budget multiplier. Membership in a monetary union could also be more painful for a country with a high (if the shock is symmetric) or small (if the shock is asymmetric) sensitivity of national prices to foreign prices. Regarding symmetric supply shocks, it could also be more painful for a country with a high sensitivity of national prices to national economic activity, or with a small sensitivity of its demand to foreign activity.</p></div>","PeriodicalId":46094,"journal":{"name":"Research in Economics","volume":"77 3","pages":"Pages 362-389"},"PeriodicalIF":1.2000,"publicationDate":"2023-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Research in Economics","FirstCategoryId":"1085","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S1090944323000443","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q3","JCRName":"ECONOMICS","Score":null,"Total":0}
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Abstract
The paper provides accurate theoretical results regarding the consequences of heterogeneities between the preferences or between the structural parameters of the member countries of a monetary union on monetary and fiscal policies, and on the stabilization of economic activity and inflation, in case of supply shocks. Economic activity and inflation are higher (smaller) in a country affected by a positive (negative) symmetric or asymmetric supply shock, despite the more contractionary (expansionary) fiscal policy in this country. In this context, we find that monetary unification could be more painful for a country with a small preference for stabilizing the budget deficit or economic activity, and on the contrary with a high preference for stabilizing inflation. Besides, regarding structural heterogeneities, monetary unification could be more painful for a country with strong transmission mechanisms of monetary policy or with a small budget multiplier. Membership in a monetary union could also be more painful for a country with a high (if the shock is symmetric) or small (if the shock is asymmetric) sensitivity of national prices to foreign prices. Regarding symmetric supply shocks, it could also be more painful for a country with a high sensitivity of national prices to national economic activity, or with a small sensitivity of its demand to foreign activity.
期刊介绍：
Established in 1947, Research in Economics is one of the oldest general-interest economics journals in the world and the main one among those based in Italy. The purpose of the journal is to select original theoretical and empirical articles that will have high impact on the debate in the social sciences; since 1947, it has published important research contributions on a wide range of topics. A summary of our editorial policy is this: the editors make a preliminary assessment of whether the results of a paper, if correct, are worth publishing. If so one of the associate editors reviews the paper: from the reviewer we expect to learn if the paper is understandable and coherent and - within reasonable bounds - the results are correct. We believe that long lags in publication and multiple demands for revision simply slow scientific progress. Our goal is to provide you a definitive answer within one month of submission. We give the editors one week to judge the overall contribution and if acceptable send your paper to an associate editor. We expect the associate editor to provide a more detailed evaluation within three weeks so that the editors can make a final decision before the month expires. In the (rare) case of a revision we allow four months and in the case of conditional acceptance we allow two months to submit the final version. In both cases we expect a cover letter explaining how you met the requirements. For conditional acceptance the editors will verify that the requirements were met. In the case of revision the original associate editor will do so. If the revision cannot be at least conditionally accepted it is rejected: there is no second revision.
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