Register  |  Login  |  Inquiries  |  Sitemap |  
Advanced Search
Journal of Economic Integration 2012 December;27(4) :633-653.
What could happen in a Monetary Union? The Perspective of Informational Asymmetry

Cornel Oros 

CRIEF, Université de Poitiers and LEO, Université d'Orléans
Corresponding Author: Cornel Oros ,Tel: (33) 05 49 28 75 51, Fax: (33) 05 49 45 41 58, Email:
Copyright ©2012 Journal of Economic Integration
The subsidiarity principle governing the collection of statistical data in a monetary union may result in asymmetrical information. The national governments may be tempted to distort their economic and financial data communicated to the union’s central bank in order to influence its monetary policy decisions. We base our analysis on a static Keynesian model in a closed monetary union and we prove that the governments’ incentives to modify their private information depend mainly on the nature of the economic shocks affecting the union members, on the degree of monetary activism, and on the extent of the union’s structural heterogeneity. We analyse the institutional mechanisms that could be used to discipline the governments and encourage them to communicate real information. An incentive contract of the “principal-agent” type or a variable geometry fiscal coordination represent two institutional solutions that could help to create a revealing equilibrium within a monetary union.

JEL Classification
E52: Monetary Policy
E58: Central Banks and Their Policies
E61: Policy Objectives; Policy Designs and Consistency; Policy Coordination
E62: Fiscal Policy
E63: Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
Keywords: Economic Policy | Asymmetrical Information | Economic Shocks | Structural Heterogeneity
1. Beetsma, R., Bovenberg, L. (1998) Monetary Unification without Fiscal Coordination may Discipline Policy-Makers, Journal of International Economics, 45(2), 239-258.
2. Beetsma, R., Bovenberg, L. (1999) Does Monetary Unification Lead to Excessive Debt Accumulation?, Journal of Public Economics, 74(3), 299-325.
3. Beetsma, R., Debrun X., Klaassen F. (2001) Is Fiscal Policy Coordination in EMU Desirable?, Swedish Economic Policy Review, 8, 57-98.
4. Beetsma, R., Uhlig, H. (1999) An Analysis of the Stability and Growth Pact, The Economic Journal, 109, 546-571.
5. Bottazzi, L., Manasse, P. (1998) Bankers’ Versus Workers’ Europe (I): Asymmetric Information in EMU, IGIER Working Paper, 127.
6. Bottazzi, L., Manasse, P. (2005) Asymmetric Information and Monetary Policy in Common Currency Areas, Journal of Money, Credit and Banking, 37(4), 603-621.
7. Chari, V.V., Kehoe, P. (1998) On the Need for Fiscal Constraints in a Monetary Union, Federal Reserve Bank of Minneapolis Working Paper, 387.
8. Crettez B. (1998) Le système d’informations économiques d’une Banque centrale européenne et le principe de subsidiarité, Revue Economique, 49(4), 989-1003.
9. Dixit, A., Lambertini, L. (2001) Monetary-fiscal Policy Interactions and Commitment Versus Discretion in a Monetary Union, European Economic Review, 45(4-6), 977-987.
10. Dornbusch, R. (1997) Fiscal Aspects of Monetary Integration, American Economic Review, 87(2), 221-223.
11. Duchassaing, S., Koessler, F. (2004) Coordination des politiques budgétaires et monétaires dans l’UEM en présence de chocs et d’informations asymétriques, Revue Economique, 1, 5-20.
12. Engwerda, J., Plasmans, J., Van Aarle, B. (2002) Cooperative and Non-Cooperative Fiscal Stabilization Policies in the EMU, Journal of Economic Dynamics and Control, 3, 451-481.
13. Mathieu, B. (2009) Tripatouiller les statistiques, la sale manie du gouvernement, l’Expansion, 1er mai.
14. Meillassoux, M. (2011) Chômage: la face cachée du “miracle économique allemand”,, 4 octobre.
15. Mundschenk, S., Von Hagen, J. (2003) Fiscal and Monetary Policy Coordination in EMU, International Journal of Finance and Economics, 4, 279-295.
16. Oros, C. (2008a) Macroeconomic Stabilization in a Heterogeneous Monetary Union: Some Insights into the Effects of Fiscal Policy Coordination, Economics Bulletin, 5(34), 1-12.
17. Oros, C. (2008b) Coordination budgétaire à géométrie variable et stabilisation conjoncturelle dans une Union monétaire hétérogène, Economie Appliquée, LXI(3), 99-132.
18. Uhlig, H. (2002) One Money but Many Fiscal Policies in Europe: What Are the Consequences?, CEPR Discussion Papers, 3296.
19. Villieu, P. (2003) Pacte de stabilité, crédibilité du policy-mix et coordination des politiques budgétaires en union monétaire, Revue Economique, 1, 25-46.
PDF Links  PDF Links
Full text via DOI  Full text via DOI
Download Citation  Download Citation
Editorial Office
Center for Economic Integration, Sejong University, 209, Neungdong-Ro, Gwangjin-Gu,
Seoul, 05006, Korea
TEL : +82-2-3408-3338    FAX : +82-2-6935-2492   E-mail :,
Browse Articles |  Current Issue |  For Authors and Reviewers |  About
Copyright© by Center for Economic Integration.      Developed in M2PI