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We document stark asynchronicity across U.S. states, particularly across groups of states whose populations have voted consistently Democrat or consistently Republican in national elections; and we show that the risk-sharing channels of these groups of states differ substantially. However, we find that these groups of states–even swing states, where the role of fiscal flows is small (on par with Europe's)–do share risk. Indeed, we halve previous estimates of states' residual risk by using new data to account for sharing risk through changes in population, prices, and durable goods consumption. These findings indicate that political differences alone do not themselves preclude macroeconomic risk sharing within a monetary union. [ABSTRACT FROM AUTHOR]

This paper offers a comprehensive view of international risk sharing and of related policy issues from the perspective of the European Union. The traditional analyses contemplate three risk-sharing channels: the capital markets channel (through cross border portfolio investments), international transfers and the credit markets channel (via savings). Comparative analyses reveal that, on average, about 80% of the shock remains unsmoothed in Europe while only about 18% of the shock is transmitted to consumers within the US. From aggregated figures, there is space for improving, particularly, the cross-border investments channel in Europe. In this sense, the completion of the Banking and Capital Markets Union are expected to boost risk sharing across European member states. We also review new additional issues usually not contemplated by the traditional literature as depreciation, migration and the role of sovereigns and two new additional channels recently considered in the literature: government consumption and the real exchange rate. Finally, we also examine recent analysis related to the geographic distribution of risk sharing. [ABSTRACT FROM AUTHOR]

Relying on recent research (e.g. Johnston, 2016; Henning, 2017; Hall, 2017), we show that the economic advance of the euro zone requires identifying a superior economic stability among the members, wherein creditor economies employ the space applicable to them to maintain economic growth. Under monetary union, economies without export-sector assisting corporatist entities lost effectiveness compared with their corporatist neighbors, experienced incessantly escalating trade/current account deficits, and depended massively on global borrowing. Institutional strengths for wage coordination were important in the advance to the euro crisis, encompassing those that facilitate diverse types of skill formation and cutting edge key to the long-run growth forecasts of an economy. [ABSTRACT FROM AUTHOR]

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Bond market integration clearly changes in response to economic and financial conditions, since the level of risk aversion changes and investors require time-varying compensation for accepting a risky payoff from financial assets. In this paper we examine the dynamic behaviour of European Government bond market integration using an asset pricing model based on that of Bekaert and Harvey ( ). Our sample period begins in 2004, after a period of calm and tranquillity, and ends in 2009, with a significant widening of sovereign bond spreads. Our results show evidence of time-varying level of integration for all European countries and suggest that, from the beginning of the financial market tensions in August 2007, markets moved towards higher segmentation, and the differentiation of country risk factors increased substantially across countries. However, the impact of the financial and economic crisis has been much more harmful for EMU members' sovereign bond markets, since it has prompted an important backward step in their integration process. [ABSTRACT FROM AUTHOR]

The merging of national currencies into a single-currency area is an important factor of financialisation in Europe, as it has disposed of monetary barriers within Euroland, thereby allowing free mobility of financial capital in the form of bank deposits across the whole European Monetary Union (EMU). This monetary–structural change has increased economic divergence and financial instability within the euro area, rather than being a factor of stability and convergence. Further, the payment infrastructure within the EMU is defective, as it leaves the payee’s country with a claim on the payer’s country. This is a monetary–structural factor of financial imbalances across Euroland. [ABSTRACT FROM AUTHOR]

The financial crisis has made the need for a more integrated regulatory and supervisory framework for the financial services sector evident. An important step towards this aim is the establishment of the Single Supervisory Mechanism. European leaders have committed to moving toward a banking union, in which bank regulation and supervision, deposit guarantees, and the handling of troubled banks will be integrated across at least the euro area and possibly across the wider European Union. This paper provides an overview of research on this topic. We also identify important future research questions that emerge from both the literature and the current debate. [ABSTRACT FROM AUTHOR]

The aim of the paper is to evaluate the impact of the euro introduction in the Czech Republic on the trade with euro area. The paper continue the present studies on expected impacts of euro introduction. Benefits associated with a monetary union integration for a newly acceding country are the larger, the higher (or the more growing, as appropriate) is the integration of the country's economy with the countries of the monetary union. These benefits are further subject to reducing the exchange rate volatility in respect of international trade relations. The stabilizing effect of the replacement of the Czech crown with the Euro will lead to the stimulation of mutual trade. The paper concludes that the integration of the Czech economy with the euro area is high (59% for foreign trade and 82% for foreign direct investment inflows) and increasing. For the assessment of the exchange rates volatility the weightet variation coefficient is used. In case the Czech crown is in fact replaced by the euro, the volatility would decrease to one-half. Furthermore, the risk of a monetary crisis would be eliminated. However the Rose Effect in the trade with euro area will be weak. [ABSTRACT FROM AUTHOR]

Business cycle synchronization represents a condition for the successful implementation of the common monetary policy within the Economic and Monetary Union. There is a tight relation between business cycle synchronization and the economic convergence of the Member States of the Monetary Union. Investigating the specialized literature, this study analyses below the factors which influence the synchronization of the economic fluctuations of the economies in the Euro area. A second objective of this study is represented by the pointing out of the evolution of the synchronization process of the business cycle after the adoption of the euro, in the euro area countries by reference to the empiric evidence. The hypothesis of the study states that the introduction of the unique currency in 1999 resulted into the increase of the synchronization degree of the business cycle. [ABSTRACT FROM AUTHOR]

In the beginning, we precisely define optimal currency area, and what is qualitative differency between the term Optimum currency area, and terms Currency area and Monetary union, that exists in the major of the European teritorry. In the second part of the paper we discuss major characteristics and assumptions needed to be fullfiled in order for currency area to be at the same time optimum currency area, too. In the third part we discussed deficiency of currecy area vs reasons to join it. Instead of conclusion we present briefly European experience in unique currency, as well as the issue is that particular currency area is at the same time optimum currency area. [ABSTRACT FROM AUTHOR]

Europe is under debt threat, facing the biggest crisis of uncertainty. If Euro fails, Europe fails. Since the Second World War, this is the hardest hour for Europe. One of the biggest limitations of global integration of EU is that small and weak countries could not fall in line with strong economies. This crisis is the example in this regard. The recent summit at Cannes has failed in giving concrete solution to the debt crisis especially in case of Greece, Italy, Portugal, Ireland and Spain. The crisis in Greece and ltaly cost the resignations of two popular Prime Ministers. The debt crisis is pushing the EU in general and Greece, Portugal, Spain, Ireland and Italy in particular in recession. Accordingly, the growth forecast is reduced to 0.5 per cent in 2012 from 1.8 per cent. EU agrees on new treaty. The present paper deals with the major issues, with which the Euro zone is confronting with. [ABSTRACT FROM AUTHOR]

European political leaderships have responded to the emergence of global finance with a sustained drive to integrate Europe's own financial systems on the basis of a switch from classical bank credit to tradable securities. In itself, this was a rational response. However, financial integration was pursued at breakneck speed and in disregard of important public goods including economic stability and social justice. Reforms were undertaken in a climate of moral panic, in the false belief that the EU faced a serious problem of external competitiveness. In consequence, Europe's banks and institutional investors were badly exposed to the sub-prime crisis, the Eurozone has been radically disorganized and the EU has had little influence on the evolution of global financial structures and practices. [ABSTRACT FROM AUTHOR]

In spite of the structural heterogeneity of the Eurozone, the main objective of the European Central Bank (ECB) is to preserve price stability for the union as a whole, and she pays full attention to Union-wide inflation and output, neglecting national divergences. In this paper, we wonder, at a theoretical level, about the social loss associated with such a "centralized" objective, and we show the existence of an "optimal" contract for the common central bank, which ensures a correct stabilization of national magnitudes. Furthermore, we show that social welfare does not necessarily improve if the ECB worries about inflation divergences without being concerned about output divergences in the Union. [ABSTRACT FROM AUTHOR]

In this paper we extend Nordhaus’ (Brookings Pap Econ Act (2):139–199, ) results to an environment which may represent the current European situation, characterised by a single monetary authority and several fiscal bodies. We show that, even assuming that the monetary and the fiscal authorities share the same ideal targets, in the presence of asymmetric shocks the “symbiosis” result found by Dixit and Lambertini (J Int Econ 60:235–247, ) no longer obtains. Thus, fiscal rules as those envisaged in the Maastricht Treaty and in the Stability and Growth Pact may work as monetary/fiscal coordination devices that improve welfare. The imposition of common targets, however, may work as a substitute for policy coordination only if these are made state contingent, an aspect that the recent version of the Stability and Growth Pact takes into account in a more appropriate way than its original version. [ABSTRACT FROM AUTHOR]

This paper uses the European Commission’s Consumer Survey to assess whether inflation expectations have converged and whether inflation uncertainty has diminished following the introduction of the euro in Europe. Consumers’ responses to the survey suggest that inflation expectations depend more on past national inflation rates than on the ECB’s anchor for price stability. Inflation expectations do not converge significantly faster than actual inflation rates. Regarding inflation uncertainty, the data indicate a relationship with country size following the introduction of the euro. This suggests that within EMU, inflation uncertainty may increase in countries that have a smaller influence on ECB policy. [ABSTRACT FROM AUTHOR]

This note reconsiders the results obtained by Matsen and Røisland [Eur. J. Political Economy 21 (2005) 365–384] by dropping the simplifying assumption that the median of country-specific shocks is equal to their mean. Majority voting then increases the volatility of the chosen interest rate without giving member countries a sufficient probability of having their domestic shocks absorbed by the common monetary policy. It thus results in lower welfare than other decision rules. When the variances of domestic shocks sufficiently differ, voting may however reduce the volatility of the interest rate and raise welfare in more stable countries. [Copyright &y& Elsevier]

Since the euro was launched, divergences in European economies'evolutions have been more significant than generally expected. The article, based on a multinational macroeconomic model describing the interdependence between 14 European countries, examines the role played by relative-price adjustment mechanisms and difficulties inherent in asymmetric evolutions. The efficiency of relative-price adjustment mechanisms seems limited and, even in the most flexible countries, the return to equilibrium is slow and still incomplete after 10 years. Differences in relative-price adjustment mechanisms remain a source of asymmetries between member countries. Extra-European exchanges have a stabilizing role which is uneven on account of trade openness and price elasticities. A decrease of the world demand and a depreciation of the euro, still have an important impact with significant disparities between countries. Several lessons can be drawn in terms of economic policy. A more restrictive European fiscal policy proves more costly in the long run in Germany and the Netherlands on account of the weakness of price compensation effects. On the contrary, thanks to their greater flexibility, the United Kingdom and Sweden can offset an initial negative shock more rapidly. The wage dimension in the definition of a good European policy mix has also to be examined. [ABSTRACT FROM AUTHOR]

The article presents Economic Department working paper titled "Housing Markets and Adjustment in Monetary Union," by Peter Hoeller and David Rae. It highlights the factors that limit or increase cyclical divergence in the Europe area and reviews one policy area that is important in fostering a speedy adjustment to shocks, the transmission of monetary policy via the housing market, which can be a source of resilience as well as a factor leading to prolonged divergence. It notes that it is necessary to have a financial system that can withstand asset price bubbles to have a better coordinated supervision across the area.

This paper studies the impact of monetary arrangements on trade integration and business cycle correlation in late 19th century Europe. We estimate a gravity model and show that tighter monetary integration was associated with substantially higher trade, as in recent studies using contemporary data. For instance, the Austro-Hungarian monetary union improved trade between member states by a factor of 3. To explain this, we build and estimate a simple model where greater monetary integration weakens the current account constraint by fostering business cycle co-movements. [ABSTRACT FROM AUTHOR]

Analyzes and discusses the coordination of fiscal and monetary policies in the Economic and Monetary Union in Europe. Framework for studying monetary and fiscal policy in a monetary union to explore the implications of the common currency for policy coordination; Interaction of monetary and fiscal policies in the short run; Processes for macroeconomic policy coordination.

Optimal Currency Area (OCA) theory offers criteria for evaluating the optimality of monetary union arrangements. This paper reviews the use that has been made of these criteria in the specific context of European Monetary Union. It reviews the use of business cycle synchronization data and the data produced by SVAR analyses, which led to the ‘core–periphery’ distinction. It also reviews extensions of the criteria that have been proposed or generated in this context: in particular, the proposition that the criteria may be ‘endogenous’. It presents Taylor rule estimates to check for inhomogeneities in Euro Area performance. The paper concludes that OCA criteria provide a useful starting point for evaluating monetary union options. Copyright © 2003 John Wiley & Sons, Ltd. [ABSTRACT FROM AUTHOR]

Discusses employment theory and prospects of employment policy in Europe after 1992. Influence of the removal of non-tariff barriers on costs; Microeconomic benefits; Continuation of unemployment as a major problem in European economies; Macroeconomic theory in the 1990s; Implications of the Keynesian theory in the 1990s.

The creation of a monetary union in Europe is often justified by the desire to reap the full benefits of economic integration. The complete removal of capital controls raises a large number of issues. The case for free capital mobility is strong, but not overwhelming. It hinges on issues of technology, transport costs, market structure and labour mobility, and in the end is an empirical matter, for which US experience may provide useful information. Policy-making institutions differ in important respects, however. The US tradition of fiscal federalism, for example, has no EC-wide counterpart. Yet its functions seem a desirable feature of a monetary union. In particular it is shown to play an important role in absorbing regional disturbances, mostly via the tax system. US experience also suggests that a currency union creates pressure for fiscal policy harmonization, affecting both taxes and spending. Although a currency union fundamentally alters the balance-of-payments adjustment process, the potential problem of depressed regions remains a serious one. Given the increased tightness of the external constraint, the limited extent of labour mobility, and other features of European labour markets, solutions based on US experience include extensive swap facilities and a European version of fiscal federalism. [ABSTRACT FROM AUTHOR]