Innovative work has been carried out on exchange rates, interest rates, macroeconomic policy coordination and monetary integration in Europe. The behaviour of trade unions within the European Community has been investigated and an international version has been established for the European Community of the hump shaped relationship found between corporatism and the degree of trade union centralization on the one hand and unemployment on the other hand. The best and most likely response of trade unions to the liberalization of European markets has also been investigated.
Work on testing for the intertemporal solvency for the United States government has been refined and some appropriate econometric tests have been developed for this purpose. This work will be extremely useful in drawing theoretical and empirical conclusions about the fiscal preconditions that have been agreed upon at the recent Maastricht summit on the Economic Monetary Union (EMU). Some theoretical work has been completed on an integration of stabilization and public finance (solvency) theories of budgetary policies.
Work on exchange rate bands and target zones involved research on stochastic learning about regime shifts and an investigation of the scope for monetary accommodation and exchange rate intervention within the bands. It was found that when the analysis is conducted within a framework that allows for nominal wage rigidities and involuntary unemployment, it is possible to get a hump shaped rather than a U-shaped curve for the conditional exchange rate distribution. Previous models of exchange rate bands contradicted this latter stylized empirical fact.
The joint research network will bring together researchers to work on macroeconomic policy and monetary integration in Europe. Most of the research activities will take place during visits at the CentER for Economic Research, Tilburg University.
The proposal involves both theoretical and empirical research. The theoretical research will be primarily concerned with the implications of increased monetary integration in Europe for the scope and need for European coordination of fiscal policies and, more specilically, whether harmonisation and convergence of fiscal policies is a good thing. The question of whether increased monetary integration will also necessarily mean less autonomy for the treasuries of national member states will also be addressed. The empirical work will, in part address these issues, but will also pay a lot of attention to the econometric modelling of intra-European exchange rates paying careful attention to bands and intervention policy.
Funding SchemeCSC - Cost-sharing contracts