Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/60490 
Year of Publication: 
2012
Series/Report no.: 
Economics Discussion Papers No. 2012-38
Publisher: 
Kiel Institute for the World Economy (IfW), Kiel
Abstract: 
The paper analyzes the usefulness of budgetary cooperation in a monetary union, even if it is limited to a subgroup of countries with close structural characteristics. The author finds that its advantages depend on the nature of the shocks and on the width of the heterogeneities within the monetary union. Budgetary cooperation between countries where the sensitivities of economic activity to public expenditures and to foreign economic activity are sufficiently high, is beneficial to stabilize symmetric demand shocks. It is beneficial to stabilize symmetric supply shocks if it concerns a sufficiently large number of countries. On the contrary, budgetary cooperation is generally detrimental to stabilize asymmetric demand or supply shocks.
Subjects: 
economic stabilization
monetary union
budgetary cooperation
demand shocks
supply shocks
structural heterogeneity
JEL: 
E61
E63
F41
F42
Creative Commons License: 
cc-by-nc Logo
Document Type: 
Working Paper

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