Download publication

Working Paper

Cross-country insurance mechanisms in currency unions

Countries in a monetary union can adjust to shocks either through internal or external mechanisms. We quantitatively assess for the European Union a number of relevant mechanisms suggested by Mundell’s optimal currency area theory, and compare them to the United States.

By: , and Date: March 27, 2014 Topic: Banking and capital markets

Countries in a monetary union can adjust to shocks either through internal or external mechanisms. We quantitatively assess for the European Union a number of relevant mechanisms suggested by Mundell’s optimal currency area theory, and compare them to the United States.

For this purpose, we update a number of empirical analyses in the economic literature that identify (1) the size of asymmetries across countries and (2) the magnitude of insurance mechanisms relative to similar mechanisms and compare results for the European Monetary Union (EMU) with those obtained for the US.

To study the level of synchronization between EMU countries we follow Alesina et al. (2002) and Barro and Tenreyro (2007). To measure the effect of an employment shock on employment levels, unemployment rates and participation rates we perform an analysis based on Blanchard and Katz (1992) and Decressin and Fatas (1995). We measure consumption smoothing through capital markets, fiscal transfers and savings, using the approach by Asdrubali et al. (1996) and Afonso and Furceri (2007). To analyze risk sharing through a common safety net for banks we perform a rudimentary simulation analysis.

Read article More on this topic More by this author
 

External Publication

L’Union européenne et les États-Unis, un an après

Après une année troublée par Kaboul et AUKUS, qu'avons-nous retenu de l'an I de la présidence Biden ? Maria Demertzis revient sur les évènements marquants de l'année 2021 pour la relation entre les États-Unis et l'Union européenne.

By: Maria Demertzis Topic: Global economy and trade Date: December 8, 2021
Read article More on this topic More by this author
 

Podcast

Podcast

What to watch in 2022: China's economic outlook

Our end of 2021 recap of China’s economic activities.

By: The Sound of Economics Topic: Global economy and trade Date: December 8, 2021
Read about event More on this topic
 

Upcoming Event

Dec
9
14:00

How to deal with small banks: consolidation, tailoring and the fintech challenge

Small banks face multiple challenges. What structural changes are needed to tackle these pressures?

Speakers: Alexander Lehmann, Nicolas Véron, Xavier Vives, Anne Fröhling and Philip Evans Topic: Banking and capital markets
Read article More by this author
 

Blog Post

European governance

The Global Gateway: a real step towards a stronger Europe in the world?

Disappointment at the lack of fresh cash from European Union global connectivity strategy is short-sighted: Europe supports global development more than any other country in the world. Using existing funds more strategically is the right priority for now.

By: Simone Tagliapietra Topic: European governance, Global economy and trade Date: December 7, 2021
Read article More on this topic More by this author
 

External Publication

Country case studies on resolving problem loans in Europe: Crises, policies and institutions

Contribution to 'Nonperforming Loans in Asia and Europe—Causes, Impacts, and Resolution Strategies' published by the Asia Development Bank.

By: Alexander Lehmann Topic: Banking and capital markets Date: December 3, 2021
Read about event
 

Past Event

Past Event

China’s medium term outlook: Will innovation save China from becoming old before it becomes rich?

What can China do to stop the deceleration of its economy. Is innovation the solution?

Speakers: Jean-Francois Di Meglio, Alicia García-Herrero and Guntram B. Wolff Topic: Digital economy and innovation, Global economy and trade Date: December 1, 2021
Read article More on this topic More by this author
 

Podcast

Podcast

A new consensus for economic resilience

Is there a need for systemic reform of global economic governance?

By: The Sound of Economics Topic: Global economy and trade Date: December 1, 2021
Read article Download PDF More on this topic More by this author
 

External Publication

Chinese economic statecraft: what to expect in the next five years?

Chapter from 'Storms Ahead: the Future Geoeconomic world order' on the expectations from the next five years of Chinese economic policy, published on 27 October 2021.

By: Alicia García-Herrero Topic: Global economy and trade Date: November 26, 2021
Read about event More on this topic
 

Past Event

Past Event

Advancing global value and supply chains to mitigate the challenges arising from the pandemic

Session at the 1st ASIA-EUROPE ECONOMIC AND BUSINESS FORUM: Transitioning to a New Normal: Leveraging Global Value Chains, Multilateralism and the 4IR

Speakers: Carmen Cano, Alicia García-Herrero, Jong Woo Kang, André Sapir, Luca Silipo and Tetsuya Watanabe Topic: Global economy and trade Location: Phnom Penh, Cambodia Date: November 24, 2021
Read about event More on this topic
 

Upcoming Event

Jan
20
14:00

Is China’s private sector advancing or retreating?

A look into the Chinese private sector.

Speakers: Reinhard Bütikofer, Nicolas Véron and Alicia García-Herrero Topic: Global economy and trade
Read about event More on this topic
 

Past Event

Past Event

The UK strategy for Green Finance

This members-only event discusses the UK's strategy for greening the financial system.

Speakers: Adam Lyons, Fayyaz Muneer and Nicolas Véron Topic: Banking and capital markets Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: November 22, 2021
Read article More by this author
 

Blog Post

Fiscal arithmetic and risk of sovereign insolvency

The record-high debt levels in advanced economies increase the risk of sovereign insolvency. Governments should start fiscal consolidation soon in an environment of low nominal and real interest rates and post-COVID growth.

By: Marek Dabrowski Topic: Global economy and trade, Macroeconomic policy Date: November 18, 2021
Load more posts