Abstract
The loss of the exchange rate as an independent policy instrument implied by European monetary union calls for an insurance scheme as a buffer against asymmetric shocks. We study the performance of such a system using historical data. A reasonable insurance scheme can be implemented on the basis of a fairly complex econometric formula. Simplifying the computation of the transfers severely worsens the performance of the system. Forcing the system to balance financially is not a critical constraint. The simulations show that stabilizing asymmetric shocks around a common trend may amplify the univariate variance of GDP for some member countries.
| Original language | English (US) |
|---|---|
| Pages (from-to) | 331-353 |
| Number of pages | 23 |
| Journal | Manchester School |
| Volume | 66 |
| Issue number | 3 |
| DOIs | |
| State | Published - Jun 1998 |
| Externally published | Yes |
ASJC Scopus subject areas
- Economics and Econometrics