[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/p/igi/igierp/127.html
   My bibliography  Save this paper

Bankers' versus Workers' Europe (I): Asymmetric Information in EMU

Author

Listed:
  • Laura Bottazzi
  • Paolo Manasse
Abstract
The delegation of monetary policy to a supranational central bank creates a conflict of interest between residents of different countries. For example, the country in recession may favor more inflation to boost output, while the country in boom prefers exactly the opposite.This conflict gives rise to an adverse selection problem. Provided each government has private information about the current state of the economy, it may try to exploit it in order to shift the common monetary policy to his own preferred way. The paper shows that problems of this kind can generate both an inflation and primary deficit bias (in line with the worries of Workers' Europe addressed by the "stability pact") as well as an excess monetary discipline and recession bias (in line with the worries addressed by the Bankers' Europe concern).When information problems are particularly severe, monetary and fiscal policy becomes relatively insensitive to business cycle conditions, and too little "smoothing" is done over the business cycle.

Suggested Citation

  • Laura Bottazzi & Paolo Manasse, "undated". "Bankers' versus Workers' Europe (I): Asymmetric Information in EMU," Working Papers 127, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    • Handle: RePEc:igi:igierp:127
    as

    Download full text from publisher

    File URL: https://repec.unibocconi.it/igier/igi/wp/1998/127.pdf
    Download Restriction: no
    File URL: https://repec.unibocconi.it/igier/igi/wp/1998/127.zip
    Download Restriction: no
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Bottazzi, Laura & Manasse, Paolo, 2005. "Asymmetric Information and Monetary Policy in Common Currency Areas," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 37(4), pages 603-621, August.
    2. Massimo Bordignon & Paolo Manasse & Guido Tabellini, 2001. "Optimal Regional Redistribution under Asymmetric Information," American Economic Review, American Economic Association, vol. 91(3), pages 709-723, June.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:igi:igierp:127. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: http://www.igier.unibocconi.it/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.