Discussion Paper
No. 2012-38 | August 15, 2012
Séverine Menguy
Structural Heterogeneity and Partial Budgetary Cooperation in a Monetary Union

Abstract

The paper analyzes the usefulness of budgetary cooperation in a monetary union, even if it is limited to a subgroup of countries with close structural characteristics. The author finds that its advantages depend on the nature of the shocks and on the width of the heterogeneities within the monetary union. Budgetary cooperation between countries where the sensitivities of economic activity to public expenditures and to foreign economic activity are sufficiently high, is beneficial to stabilize symmetric demand shocks. It is beneficial to stabilize symmetric supply shocks if it concerns a sufficiently large number of countries. On the contrary, budgetary cooperation is generally detrimental to stabilize asymmetric demand or supply shocks.

Data Set

JEL Classification:

E61, E63, F41, F42

Cite As

Séverine Menguy (2012). Structural Heterogeneity and Partial Budgetary Cooperation in a Monetary Union. Economics Discussion Papers, No 2012-38, Kiel Institute for the World Economy. http://www.economics-ejournal.org/economics/discussionpapers/2012-38


Comments and Questions



Anonymous - Modelling
August 16, 2012 - 11:03
Although this paper claims to use a more flexible model than what was used before, it is still basically a Keynesisn one and this kind of model has many unstated assumptions, which imply that certain variables don't change. In particular the Keynesian model includes the land values within the capital investments. This is basically wrong, since a reduction in the stock-market yields or dividends results in the land becoming more valuable. Its value is found by "capitalization" of the rent, that is by dividing the rent by the average yield. This variable will not perform in a parallel manner to that of the dividends on the shares.

Fritz Breuss - Reader Comment
September 25, 2012 - 10:13
See attached file

Séverine Menguy - Reply to Fritz Breuss
October 04, 2012 - 14:35
Reply to Fritz Breuss

Anonymous - Referee Report 1
September 28, 2012 - 10:25
See attached file

Séverine Menguy - Reply to Referee Report 1
October 01, 2012 - 09:52
See attached file

Anonymous - Referee Report 2
October 01, 2012 - 10:09
See attached file

Séverine MENGUY - Reply to Referee 2
October 06, 2012 - 11:21
see below