Transmission Channels, Risk Sharing, and EMU Dispersions
Year: 2008 Volume: 58 Issue: 3 -4 Pages: 152-165
Abstract: First, using a small theoretically founded general equilibrium model fitted to the data by Bayesian techniques, the article assesses the contribution of interest rates and housing prices to dispersions within the European Monetary Union (EMU). It finds that the different behavior of interest rates just before and after the introduction of the euro has contributed significantly to growth dispersions in the EMU. However, this has been a one-off shock whose effects, particularly on construction, should decline over time. Second, the article analyzes the contribution of the financial system to sharing country-specific risks in a panel framework. It finds that further financial sector integration in the EMU could do much more to insure countries against shocks and increase consumption smoothing.
JEL classification: C3, C33, E31, F15, F2, F36
Keywords: consumption smoothing, output and inflation dispersions, risk sharing
RePEc: http://ideas.repec.org/a/fau/fauart/v58y2008i3-4p152-165.html
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