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...

In this paper we first review the available literature on the degree of insurance against shocks, provided by the central budget in the federal systems already existing. Next, we discuss the main points raised on the debate about the implementation of an automatic mechanism designed to cope with...

Insurance Mechanisms against Asymmetric Shocks in a Monetary Union : a Proposal with an Application to EMU, by Oscar Bajo-Rubio and Carmen Díaz-RoldánIn this paper we propose a simple, automatic insurance mechanism designed to cope with asymmetric shocks in a monetary union, which could be...

The paper addresses the question what effects the enlargement of a monetary union will have on necessary structural reforms in the (low distortion) member countries and the (high distortion) candidate countries. While monetary union lowers reforms in the candidate countries, members of the...

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...

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...

The paper analyses the role of monetary policy for cyclical movements of investment and asset markets in East Asia and Europe based on a Mises-Hayek overinvestment framework. It is shown how the gradual global decline of interest rates has triggered wandering overinvestment cycles in Japan,...

The paper analyses the common European monetary policy based on a Mises-Hayek overinvestment framework, which is combined with the theory of optimum currency areas. It shows how since the turn of the millennium a too expansionary monetary policy contributed to unsustainable overinvestment booms...

This paper analyses how optimal policy responses to productivity shocks change when the government loses the exchange rate as a policy tool after entering a monetary union. It is shown that over the business cycle (generated as cyclical changes in productivity), both deficit and inflation will...