Welfare‐theoretic Optimal Policies in a New‐Keynesian Economy with Heterogeneous Regions
Any Role for Financial Integration
Bibliographic Data
| ID | 10069762 |
|---|---|
| Authors | Marcin Wolski (0000-0001-8894-6631, European Investment Bank Luxembourg, corresponding author) |
| Year | 2015 |
| Volume | 54 |
| Issue | 3 |
| Pages | 742-761 |
| Publication date | 2015-11-04 |
| Peer Reviewed | Yes |
| Open Access | Yes |
| Type | ARTICLE |
| Venue | JCMS Journal of Common Market Studies (JOURNAL) |
| Journal identifiers | ISSN: 0021-9886 • E-ISSN: 1468-5965 |
| Publisher | Wiley (PUBLISHER • GB) |
| DOI | 10.1111/jcms.12337 |
| OpenAlex | W2156904822 |
| Language | EN |
| References cited | 28 |
This paper provides a welfare‐theoretic explanation of the inferiority of area‐wide policies, com‐ pared to their country‐specific equivalents, in the case when shocks spread unevenly across regions. Our analysis points out that under union‐wide policies, regions which suffer relatively more from shocks will benefit from policy interventions at the expense of others. Using the new‐Keynesian framework we propose a new area‐wide welfare‐theoretic loss function which is heterogeneity‐consistent, i.e. it guarantees the same outcomes as if a policy maker was targeting each of the regions individually. We study the dynamics of the theoretically‐induced losses resulting from the area‐wide policies using the example of the euro zone in the years 1999–2013 and compare it with the level of money market integration. Our study suggests that more intense financial integration was associated with smaller long‐run average losses from heterogeneity‐inconsistent aggregate policies. We find no similar effects for short‐run dynamics
Economics · Financial Integration · Financial market · Macroeconomics · Monetary policy · New Keynesian economics · Welfare · Finance · Fiscal Policies and Political Economy · Global Financial Crisis and Policies · Monetary Policy and Economic Impact
Economic Reform and the Process of Global Integration
Staggered prices in a utility-maximizing framework
Residual-based tests for cointegration in models with regime shifts
Testing for a unit root in time series regression
A Simple, Positive Semi-Definite, Heteroskedasticity and Autocorrelation Consistent Covariance Matrix
Approximate Asymptotic Distribution Functions for Unit-Root and Cointegration Tests
Financial Flows and the International Monetary System
Political Parties, Public Opinion and European Integration in Post-Communist Countries
Asymmetries in Monetary Policy Transmission
Monetary Policies in the Presence of Asymmetries
The Correlates of Change in International Financial Regulation
| Citation velocity | historical |
|---|---|
| Highly cited | No |