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Insurance Mechanisms against Asymmetric Shocks in a MonetaryUnion: a Proposal with an Application to EMU*
Published online by Cambridge University Press: 17 August 2016
Summary
In this paper we propose a simple, automatic insurance mechanism designed tocope with asymmetric shocks in a monetary union, which could be used asstarting point of a more elaborated policy instrument. The mechanism woulduse as indicator of the occurrence of a shock the changes in theunemployment rate of the countries belonging to the union, and would befinanced through a fund built from contributions of these countries as apercentage of their tax receipts. The fund would be distributed among thecountries affected by a negative asymmetric shock according to theproportion in which every one of them would have been affected by the shock.Our proposal is illustrated by means of an empirical application to the caseof EMU.
Résumé
Nous proposons dans cet article un mécanisme simple d'assurance automatiqueconçu pour traiter les chocs asymétriques dans une union monétaire, quipourrait être utilisé comme point de départ d'un instrument de politiqueplus élaboré. Ce mécanisme pourrait être utilisé comme indicateur del'arrivée d'un choc sur les changements du taux de chômage des pays del'Union, et pourrait être financé par un fonds de contributions des membresexprimées en pourcentage de leurs recettes fiscales. Ce fond pourrait êtredistribué aux pays qui ont subi un choc asymétrique négatifproportionnellement à l'intensité du choc. Nous illustrons notre propositionpar une application empirique à l'Union Economique et monétaire.
Keywords
Information
- Type
- Research Article
- Information
- Recherches Économiques de Louvain/ Louvain Economic Review , Volume 69 , Issue 1 , 2003 , pp. 73 - 96
- Copyright
- Copyright © Université catholique de Louvain, Institut de recherches économiques et sociales 2003
Footnotes
*
The authors wish to thank the comments received from participants atthe 6th World Congress of the Regional Science AssociationInternational (Lugano, May 2000), the International Symposium onEconomic Modelling (Pamplona, June 2000), and, especially, ananonymous referee of this journal. Financial support from the SpanishInstitute for Fiscal Studies and the Spanish Ministry of Education,through the Project PB98-0546-C02-01, is also gratefullyacknowledged.
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