Regional insurance against asymmetric shocks: An empirical study for the European community

Jürgen Von Hagen, George W. Hammond

Research output: Contribution to journalArticlepeer-review

36 Scopus citations

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 languageEnglish (US)
Pages (from-to)331-353
Number of pages23
JournalManchester School
Volume66
Issue number3
DOIs
StatePublished - Jun 1998
Externally publishedYes

ASJC Scopus subject areas

  • Economics and Econometrics

Fingerprint

Dive into the research topics of 'Regional insurance against asymmetric shocks: An empirical study for the European community'. Together they form a unique fingerprint.

Cite this