Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/108789
Authors: 
Hefeker, Carsten
Neugart, Michael
Year of Publication: 
2015
Series/Report no.: 
CESifo Working Paper 5244
Abstract: 
It is widely debated whether a monetary union has to be accompanied by a fiscal transfer scheme to accommodate asymmetric shocks. We build a model of a monetary union with a central bank and two heterogeneous countries that are linked by a fiscal transfer scheme with repercussions on monetary policy. A central bank aiming at securing the existence of a monetary union in the presence of asymmetric shocks has to compensate single countries for the tax distortions arising from fiscal transfers. Monetary policy may become more expansionary or restrictive depending on asymmetries between member countries' inflation aversion and exit costs.
Subjects: 
monetary union
fiscal transfer scheme
monetary policy
asymmetric shocks
exit
JEL: 
E52
E63
F33
Document Type: 
Working Paper

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