NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Aftershocks of Monetary Unification: Hysteresis with a Financial Twist

Tamim Bayoumi, Barry Eichengreen

NBER Working Paper No. 23205
Issued in February 2017
NBER Program(s):IFM

Once upon a time, in the 1990s, it was widely agreed that neither Europe nor the United States was an optimum currency area, although moderating this concern was the finding that it was possible to distinguish a regional core and periphery (Bayoumi and Eichengreen, 1993). Revisiting these issues, we find that the United States is remains closer to an optimum currency area than the Euro Area. More intriguingly, the Euro Area shows striking changes in correlations and responses which we interpret as reflecting hysteresis with a financial twist, in which the financial system causes aggregate supply and demand shocks to reinforce each other. An implication is that if the Euro Area wishes to avoid financial booms and busts it will need vigorous, coordinated regulation of its banking and financial systems by a single supervisor—that monetary union without banking union will be prone to economic and financial instability.

You may purchase this paper on-line in .pdf format from SSRN.com ($5) for electronic delivery.

Access to NBER Papers

You are eligible for a free download if you are a subscriber, a corporate associate of the NBER, a journalist, an employee of the U.S. federal government with a ".GOV" domain name, or a resident of nearly any developing country or transition economy.

If you usually get free papers at work/university but do not at home, you can either connect to your work VPN or proxy (if any) or elect to have a link to the paper emailed to your work email address below. The email address must be connected to a subscribing college, university, or other subscribing institution. Gmail and other free email addresses will not have access.

E-mail:

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w23205

Published: Tamim Bayoumi & Barry Eichengreen, 2017. "Aftershocks of Monetary Unification: Hysteresis with a Financial Twist," IMF Working Papers, vol 17(55).

Users who downloaded this paper also downloaded* these:
Edwards w23204 The London Monetary and Economic Conference of 1933 and the End of The Great Depression: A “Change of Regime” Analysis
Blanchard, Lorenzoni, and L'Huillier w23160 Short-Run Effects of Lower Productivity Growth. A Twist on the Secular Stagnation Hypothesis
House, Proebsting, and Tesar w23147 Austerity in the Aftermath of the Great Recession
Belongia and Ireland w23157 Circumventing the Zero Lower Bound with Monetary Policy Rules Based on Money
Brunnermeier, Sockin, and Xiong w23194 China's Gradualistic Economic Approach and Financial Markets
 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us