Policy spillovers and synergies in a monetary union

Arce, Óscar; Hurtado, Samuel; Thomas, Carlos

Policy spillovers and synergies in a monetary union

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Arce, Ó, Hurtado, S, Thomas, C. Policy spillovers and synergies in a monetary union. 2016. handle: http://hdl.handle.net/10230/26780

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Abstract

We provide a general equilibrium framework for analyzing the effects of supply and demand side policies, and the potential synergies between them, in an asymmetric monetary union that faces a liquidity trap and a slow deleveraging process in its ‘periphery’. We find that the joint implementation of pro-competition structural reforms in the periphery, a fiscal expansion in the ‘core’, and forward guidance about the three policies: forward guidance re-inforces the expansionary effects of country-specific policies, and the latter in turn improve the effectiveness of forward guidance.