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Johannes PFEIFER (Universität der Bundeswehr München) “Anchored in Troubled Waters: Monetary Unions and Uncertainty”

June 16 @ 12:15 pm - 1:30 pm
Macro seminar
Time : 12h15 – 13h30
Date : 16th  June 2025

Salle 3001

Johannes PFEIFER (Universität der Bundeswehr München) “Anchored in Troubled Waters: Monetary Unions and Uncertainty ”

Abstract:

A monetary union shapes the impact of uncertainty on the economy: it does not alter the transmission of common uncertainty shocks, but significantly dampens the adverse effects of country-specific shocks. We establish this result based on time series data for 17 euro-area countries and 13 countries with flexible exchange rates. To rationalize it, we propose a model of a monetary union in which monetary policy responds to common shocks but not to country-specific ones, as each member country is small. The union dampens the effect of country-specific shocks by providing a nominal anchor in the face of country-specific uncertainty, thereby eliminating price level risk.

Organizer : Olivier LOISEL