This paper studies a multi-country currency union of small open economies. Demand-side disturbances hamper monetary union stabilisation unless participating countries’ business cycles are perfectly synchronised. In the face of country-specific supply shocks, a currency union of small open...

What kind of additional co-operation (-ordination) is necessary and feasible to cope with the new institutional set-up under EMU? Starting from the episode of the repo rate cut by the ECB in early 1999, it is asked what would have happened under a business as usual scenario. In this case, the...

The analysis deals with the conditions under which coordination is attractive to a country in the flexible exchange-rate system. In particular, great weight is attached to the design of a common policy-decision council. The starting point is the Barro- Gordon approach, which is extended to...

This paper examines the macroeconomic costs and benefits of dollarization. Economic theory suggests that the main benefit is enhanced price stability, while the main cost is higher business-cycle volatility if the dollarizing country’s output is not sufficiently correlated with that of the...

This paper analyses the interaction between a common monetary policy and differentiated labour market institutions. We develop a model of a two country monetary union. In each country, labour markets are distinguished by the degree of centralisation in wage bargaining. In each country the...

Financial regulation has shifted from a system as an oligopoly dominated by the G2/G5 to expanded clubs like the Basel Committee for Banking Supervision. Expansive clubs have to agree to terms that are closer to the preferences of soft-regulation members. Yet, once a global agreement on minimum...

This paper quantifies the interdependence in labor markets that exists in the Mercosur countries. Two sets of panel data are constructed: one formed by the aggregation of annual time series data from Argentina and Brazil, and another with data from Uruguay and Paraguay. These two sets of data...

The current instruments in the EU to deal with debt and liquidity crises include the European Financial Stability Facility (EFSF) and the European Financial Stabilisation Mechanism (EFSM). Both are temporary in nature (3 years). In terms of an efficient future crisis management framework one has...

This paper addresses the issue of macroeconomic policies in a financially heterogeneous monetary union. Optimized policy rules are used, under various budgetary policy scenarios, in a two-country DSGE model. The results indicate that a Euro-wide monetary policy strategy based on national...

The common central bank of a monetary union tends to lead a more accommodative monetary policy in order to avoid the default of the moderately indebted member countries whereas the most hardly indebted countries have to default. The optimal inflation rate increases the more numerous are the...