DP2016 An EMU with Different Transmission Mechanisms

Author(s): Giorgia Giovannetti, Ramon Marimon
Publication Date: November 1998
Keyword(s): ECB, limited participation, Monetary Policy, Transmission Mechanisms
JEL(s): E44, E52, F30, F33, F42
Programme Areas: International Macroeconomics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=2016

We develop and compute a dynamic equilibrium model where economies differ on the relative efficiency of financial intermediaries and, therefore on households portfolios and currency holdings. Our model economies have some of the features of the different financial structures in countries of the European Union and respond to monetary shocks in a way similar to the observed responses, which we also estimate. It follows that if differences on the relative efficiency of financial intermediaries persist in a monetary union, conflicts of interests in the pursuit of a common monetary policy can arise.