Market Regulation, Cycles and Growth in a Monetary Union

We build a two-country currency union DSGE model with endogenous growth to assess the role of cross-country differences in product and labor market regulations for long-term growth and for the adjustment to shocks. We show that with endogenous growth, there is no reason to expect real income converg...

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Bibliographic Details
Main Author: Abbritti, Mirko
Other Authors: Weber, Sebastian
Format: eBook
Language:English
Published: Washington, D.C. International Monetary Fund 2019
Series:IMF Working Papers
Subjects:
Online Access:
Collection: International Monetary Fund - Collection details see MPG.ReNa
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245 0 0 |a Market Regulation, Cycles and Growth in a Monetary Union  |c Mirko Abbritti, Sebastian Weber 
260 |a Washington, D.C.  |b International Monetary Fund  |c 2019 
300 |a 52 pages 
651 4 |a Italy 
653 |a Inflation 
653 |a Investment 
653 |a Finance 
653 |a Labour; income economics 
653 |a Return on investment 
653 |a Deflation 
653 |a Capital and Total Factor Productivity 
653 |a Cost 
653 |a Commodity exchanges 
653 |a Industrial productivity 
653 |a Production 
653 |a Labor markets 
653 |a General Financial Markets: General (includes Measurement and Data) 
653 |a Intangible Capital 
653 |a Demand and Supply of Labor: General 
653 |a Total factor productivity 
653 |a National accounts 
653 |a Labor 
653 |a Economic Growth of Open Economies 
653 |a Price Level 
653 |a Financial markets 
653 |a Saving and investment 
653 |a Macroeconomic Analyses of Economic Development 
653 |a Investments: General 
653 |a Labor market 
653 |a Prices 
653 |a Macroeconomics 
653 |a Capacity 
653 |a Institutions and Growth 
653 |a Commodity markets 
653 |a Capital 
653 |a Finance: General 
653 |a Production and Operations Management 
700 1 |a Weber, Sebastian 
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520 |a We build a two-country currency union DSGE model with endogenous growth to assess the role of cross-country differences in product and labor market regulations for long-term growth and for the adjustment to shocks. We show that with endogenous growth, there is no reason to expect real income convergence. Large shocks, through endogenous TFP movements, can lead to permanent changes of output and real exchange rates. Differences are exacerbated when member countries have different product and labor market regulations. Less regulated economies are likely to have higher trend growth and recover faster from negative shocks. Results are consistent with higher inflation, lower employment and disappointing TFP growth rates experienced in the less reform-friendly euro area members