Egon Zakrajšek: Financial Heterogeneity and Monetary Union (sprememba predavalnice)
Source: Seminar for probability, statistics, and financial mathematics
V četrtek, 7. decembra 2017, ob 14:15 bo v predavalnici 2.02 Fakultete za matematiko in fiziko Univerze v Ljubljani na Jadranski ulici 21 v Ljubljani potekalo predavanje Egona Zakrajška, Federal Reserve, Washington, z naslovom Financial Heterogeneity and Monetary Union.
Abstract: We analyze the economic consequences of forming a monetary union among countries with varying degrees of financial distortions, which interact with firms' pricing decisions because of customer-market considerations. In response to a financial shock, firms in financially weak countries (the periphery) maintain cashflows by raising prices--in both domestic and export markets--while firms in financially strong countries (the core) lower prices, undercutting their financially constrained competitors to gain market share. When the two regions are experiencing different shocks, common monetary policy results in a substantially higher macroeconomic volatility in the periphery, compared with a floating exchange rate regime; this translates into a welfare loss for the union as a whole, with the loss borne entirely by the periphery. By helping firms from the core internalize the pecuniary externality engendered by the interaction of financial frictions and customer markets, a unilateral fiscal devaluation by the periphery can improve the union's overall welfare.