Fragmented monetary unions

dc.contributor.author Fornaro, Luca
dc.contributor.author Grosse-Steffen, Christoph
dc.date.accessioned 2024-04-11T09:49:35Z
dc.date.available 2024-04-11T09:49:35Z
dc.date.issued 2024-06
dc.description.abstract We provide a theory of financial fragmentation in monetary unions. Our key insight is that currency unions may experience endogenous breakings of symmetry: that is episodes in which identical countries react differently when exposed to the same shock. During these events part of the union suffers a capital flight, while the rest acts as a safe haven and receives capital inflows. The central bank then faces a difficult trade-off between containing unemployment in capital-flight countries, and inflationary pressures in safe-haven ones. By counteracting private capital flows with public ones, anti-fragmentation monetary programs mitigate the impact of financial fragmentation on employment and inflation, thus helping the central bank to fulfill its price stability mandate.en
dc.format.mimetype application/pdf*
dc.identifier.uri http://hdl.handle.net/10230/59735
dc.language eng
dc.language.iso engca
dc.rights.accessRights info:eu-repo/semantics/openAccessca
dc.subject.keyword Monetary unions
dc.subject.keyword Euro area
dc.subject.keyword Fragmentation
dc.subject.keyword Optimal monetary policy in open
dc.title Fragmented monetary unionsca
dc.type info:eu-repo/semantics/workingPaperca

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