This study investigates the shock-absorbing properties of a banking union by providing a detailed comparison between the way regional financial shocks have been absorbed at the federal level in the US, but have led to severe regional (national) financial dislocation and tensions in Europe and...

This study investigates the shock-absorbing properties of a banking union by providing a detailed comparison between the way regional financial shocks have been absorbed at the federal level in the US, but have led to severe regional (national) financial dislocation and tensions in the euro...

What to do when a country experiences a sudden stop in capital inflows and has to adjust externally? Sticky wages make adjustment to an external imbalance more difficult within a monetary union. Periods of high unemployment are usually necessary to achieve the required real depreciation...

Adjustment to an external imbalance is more diffi cult within a monetary union if wages are sticky. Periods of high unemployment are usually necessary to achieve the required real depreciation (internal devaluation). Gradual adjustment is usually recommended to distribute the output and...

We analyze the economic consequences of forming a monetary union among countries with varying degrees of financial distortions, which interact with the firms' pricing decisions because of customer-market considerations. In response to a financial shock, firms in financially weak countries (the...