This paper is intended to theoretically present divergent business cycles as effects of a monetary union, even in the absence of asymmetric, exogenous shocks. The main inference form the model developed in this paper says that microeconomic optimization may lead to sub-optimal macro states and...

In this paper we analyse the likely effects of Economic and Monetary Union (EMU) on European unemployment. We start by describing the current unemployment situation in the European Union (EU). In so doing, we try to assess the relative importance of European, national and regional shocks in...

Whether countries benefit from forming a monetary union depends critically on the way monetary policy is conducted. This is mainly because monetary policy determines whether and to what extent a flexible nominal exchange rate fosters or hampers macroeconomic stabilization, even if 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...

We analyses the costs of a monetary union in West Africa by means of asymmetric aggregate demand and aggregate supply shocks. Previous studies have estimated the shock with the VAR model. We discuss the limits of this approach and apply a new technique based on the dynamic factor model. The...

This paper investigates the dynamic effects of monetary and fiscal policy in a monetary union, which is characterized by asymmetric interest rate transmission. This asymmetry gives rise to intertemporal reversals in the relative effectiveness of policy on member country outputs. The direction...

The paper explores the case for monetary and fiscal unification. Monetary policy suffers from an inflation bias because the monetary authorities are not able to commit. With international risk-sharing in a fiscal union, fiscal discipline suffers from moral hazard. An inflation target alleviates...

We analyse the costs of a monetary union in West Africa by means of asymmetric aggregate demand and aggregate supply shocks. Previous studies have estimated the shocks with the VAR model.We discuss the limits of this approach and apply a new technique based on the dynamic factor model.The...

This paper analyses the implications of cost-push shocks for the optimal choice of monetary policy target in an two-country sticky-price model. In addition to cost-push shocks, each country is subject to labour-supply and money-demand shocks. It is shown that the fully optimal coordinated policy...