IDEAS home Printed from https://ideas.repec.org/a/bla/rdevec/v12y2008i3p636-654.html
   My bibliography  Save this article

Rigidities and Inflationary Bias in a Monetary Union: The Consequences of EU Enlargement

Author

Listed:
  • Juan Cristóbal Campoy
  • Juan Carlos Negrete

Abstract

The authors analyze how the design of the central bank interacts with the implementation of structural reforms in a monetary union. They show that the first‐best is achieved when the common central bank is collectively designed, irrespective of whether or not reforms are cooperatively implemented. On the other hand, in the case where the central bank has been designed, an enlargement of the union worsens the incumbent members' welfare unless the inflation target of the monetary authorities diminishes or the accession countries implement a sufficient level of reforms prior to joining in.

Suggested Citation

  • Juan Cristóbal Campoy & Juan Carlos Negrete, 2008. "Rigidities and Inflationary Bias in a Monetary Union: The Consequences of EU Enlargement," Review of Development Economics, Wiley Blackwell, vol. 12(3), pages 636-654, August.
    • Handle: RePEc:bla:rdevec:v:12:y:2008:i:3:p:636-654
    DOI: 10.1111/j.1467-9361.2008.00477.x
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/j.1467-9361.2008.00477.x
    Download Restriction: no
    File URL: https://libkey.io/10.1111/j.1467-9361.2008.00477.x?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Jan Svejnar, 2002. "Transition Economies: Performance and Challenges," Journal of Economic Perspectives, American Economic Association, vol. 16(1), pages 3-28, Winter.
    2. Kenneth Rogoff, 1985. "The Optimal Degree of Commitment to an Intermediate Monetary Target," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 100(4), pages 1169-1189.
    3. Avinash Dixit & Luisa Lambertini, 2003. "Interactions of Commitment and Discretion in Monetary and Fiscal Policies," American Economic Review, American Economic Association, vol. 93(5), pages 1522-1542, December.
    4. Svensson, Lars E O, 1997. "Optimal Inflation Targets, "Conservative" Central Banks, and Linear Inflation Contracts," American Economic Review, American Economic Association, vol. 87(1), pages 98-114, March.
    5. Barro, Robert J & Gordon, David B, 1983. "A Positive Theory of Monetary Policy in a Natural Rate Model," Journal of Political Economy, University of Chicago Press, vol. 91(4), pages 589-610, August.
    6. Nauro F. Campos & Abrizio Coricelli, 2002. "Growth in Transition: What We Know, What We Don't, and What We Should," Journal of Economic Literature, American Economic Association, vol. 40(3), pages 793-836, September.
    7. repec:bla:kyklos:v:51:y:1998:i:4:p:509-36 is not listed on IDEAS
    8. Sibert, Anne & Sutherland, Alan, 2000. "Monetary union and labor market reform," Journal of International Economics, Elsevier, vol. 51(2), pages 421-435, August.
    9. Walsh, Carl E, 1995. "Optimal Contracts for Central Bankers," American Economic Review, American Economic Association, vol. 85(1), pages 150-167, March.
    10. Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 473-491, June.
    11. Calmfors, Lars, 2001. "Unemployment, Labor Market Reform, and Monetary Union," Journal of Labor Economics, University of Chicago Press, vol. 19(2), pages 265-289, April.
    12. Sibert, Anne, 1999. "Monetary Integration and Economic Reform," Economic Journal, Royal Economic Society, vol. 109(452), pages 78-92, January.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Martin, Fernando M., 2015. "Debt, inflation and central bank independence," European Economic Review, Elsevier, vol. 79(C), pages 129-150.
    2. Berthold Herrendorf & Manfred J.M. Neumann, 2003. "The Political Economy of Inflation, Labour Market Distortions and Central Bank Independence," Economic Journal, Royal Economic Society, vol. 113(484), pages 43-64, January.
    3. Weymark, Diana N., 2007. "Inflation, government transfers, and optimal central bank independence," European Economic Review, Elsevier, vol. 51(2), pages 297-315, February.
    4. Bohn, Frank, 2013. "Grand corruption instead of commitment? Reconsidering time-inconsistency of monetary policy," Journal of International Money and Finance, Elsevier, vol. 32(C), pages 478-490.
    5. Juan Cristóbal Campoy & Juan Carlos Negrete, 2017. "Distortionary Taxation and Central Bank Design in a Monetary Union," Hacienda Pública Española / Review of Public Economics, IEF, vol. 222(3), pages 65-90, September.
    6. Pasquale Foresti, 2018. "Monetary And Fiscal Policies Interaction In Monetary Unions," Journal of Economic Surveys, Wiley Blackwell, vol. 32(1), pages 226-248, February.
    7. Hefeker, Carsten & Zimmer, Blandine, 2011. "The optimal choice of central bank independence and conservatism under uncertainty," Journal of Macroeconomics, Elsevier, vol. 33(4), pages 595-606.
    8. Richard Mash, 2000. "The Time Inconsistency of Monetary Policy with Inflation Persistence," Economics Series Working Papers 15, University of Oxford, Department of Economics.
    9. Huiping Yuan & Stephen M. Miller & Langnan Chen, 2011. "The Optimality And Controllability Of Monetary Policy Through Delegation With Consistent Targets," Scottish Journal of Political Economy, Scottish Economic Society, vol. 58(1), pages 82-106, February.
    10. Bilbiie, Florin O., 2014. "Delegating optimal monetary policy inertia," Journal of Economic Dynamics and Control, Elsevier, vol. 48(C), pages 63-78.
    11. Luisa Lambertini & Paul Levine & Joseph Pearlman, 2007. "Fiscal Policy in a Monetary Union: Can Fiscal Cooperation be Counterproductive?," School of Economics Discussion Papers 1707, School of Economics, University of Surrey.
    12. D'Amato, Marcello & Martina, Riccardo, 2005. "Credibility and commitment of monetary policy in open economies," European Journal of Political Economy, Elsevier, vol. 21(4), pages 872-902, December.
    13. Jensen Christian, 2020. "Discretion rather than rules? Outdated optimal commitment plans versus discretionary policymaking," The B.E. Journal of Macroeconomics, De Gruyter, vol. 20(1), pages 1-9, January.
    14. Mihov, Ilian & Sibert, Anne, 2006. "Credibility and Flexibility with Independent Monetary Policy Committees," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 38(1), pages 23-46, February.
    15. Ruge-Murcia, Francisco J, 2003. "Inflation Targeting under Asymmetric Preferences," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 35(5), pages 763-785, October.
    16. repec:spo:wpmain:info:hdl:2441/6kvjk9o32n8m88c6de3gc0gltj is not listed on IDEAS
    17. Jensen, Henrik, 2000. "Optimal monetary policy cooperation through state-independent contracts with targets," European Economic Review, Elsevier, vol. 44(3), pages 517-539, March.
    18. Adam, Klaus & Billi, Roberto M., 2008. "Monetary conservatism and fiscal policy," Journal of Monetary Economics, Elsevier, vol. 55(8), pages 1376-1388, November.
    19. Sibert, Anne & Mihov, Ilian, 2002. "Credibility and Flexibility with Monetary Policy Committees," CEPR Discussion Papers 3278, C.E.P.R. Discussion Papers.
    20. Tootell, Geoffrey M. B., 1999. "Whose monetary policy is it anyway?," Journal of Monetary Economics, Elsevier, vol. 43(1), pages 217-235, February.
    21. Franz R. Hahn & Peter Mooslechner, 1999. "Zur Fundierung des Designs des Europäischen Zentralbanksystems," WIFO Monatsberichte (monthly reports), WIFO, vol. 72(1), pages 49-60, January.

    More about this item

    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:bla:rdevec:v:12:y:2008:i:3:p:636-654. 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.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with 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: Wiley Content Delivery (email available below). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=1363-6669 .

    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.