{
  "title": "Aftershocks of Monetary Unification: Hysteresis with a Financial Twist",
  "publication": "IMF Working Papers, March 13, 2017",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2017/03/13/aftershocks-of-monetary-unification-hysteresis-with-a-financial-twist-44742",
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  "summary": "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).",
  "sections": [
    {
      "heading": "Summary and core findings",
      "content": "- Revisits 1990s conclusion that neither Europe nor the United States was an optimum currency area, noting the earlier finding that a regional core and periphery could be distinguished (Bayoumi and Eichengreen, 1993).\n- Finds that the United States \"is remains\" closer to an optimum currency area than the Euro Area.\n- Identifies \"striking changes in correlations and responses\" in the Euro Area interpreted as \"hysteresis with a financial twist,\" where the financial system causes aggregate supply and demand shocks to reinforce each other.\n- Uses canonical aggregate-demand–aggregate-supply terminology and textbook-style aggregate-supply–aggregate-demand frameworks in the analysis."
    },
    {
      "heading": "Policy implications and recommendations",
      "content": "- Argues that the Euro Area needs \"vigorous, coordinated regulation of its banking and financial systems by a single supervisor.\"\n- States the policy conclusion succinctly: \"monetary union without banking union will not work.\""
    },
    {
      "heading": "Subjects and keywords (as listed)",
      "content": "- Subjects: Asset prices, Bank credit, Banking, Commercial banks, Economic integration, Economic theory, Financial institutions, Monetary unions, Money, Prices, Supply shocks\n- Keywords: aggregate demand, aggregate demand shock, aggregate supply, aggregate supply supply curve, aggregate-demand demand shock, aggregate-demand response, Asset prices, Bank credit, canonical aggregate-demand-aggregate-supply model, Commercial banks, countries aggregate demand demand shock, demand disturbance, demand shock, Europe, European Monetary union, hysterisis, long-term aggregate-supply response, Monetary unions, Northern Europe, Optimum currency area, price, sloping aggregate demand curve, supply shock, Supply shocks, textbook aggregate-supply-aggregate-demand model, textbook-style aggregate-supply, WP\n\n---\n\n Content in this bundle\n\n- Aftershocks of Monetary Unification: Hysteresis with a Financial Twist, WP/17/55, March 2017\n  - Aftershocks of Monetary Unification: Hysteresis with a Financial Twist, WP/17/55, March 2017 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Aftershocks of Monetary Unification: Hysteresis with a Financial Twist, WP/17/55, March 2017 (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2017/03/13/aftershocks-of-monetary-unification-hysteresis-with-a-financial-twist-44742"
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    "Authors: Tamim Bayoumi, Barry J. Eichengreen",
    "Published: March 13, 2017",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781475586220.001",
    "Revisits 1990s conclusion that neither Europe nor the United States was an optimum currency area, noting the earlier finding that a regional core and periphery could be distinguished (Bayoumi and Eichengreen, 1993).",
    "Finds that the United States \"is remains\" closer to an optimum currency area than the Euro Area.",
    "Identifies \"striking changes in correlations and responses\" in the Euro Area interpreted as \"hysteresis with a financial twist,\" where the financial system causes aggregate supply and demand shocks to reinforce each other.",
    "Uses canonical aggregate-demand–aggregate-supply terminology and textbook-style aggregate-supply–aggregate-demand frameworks in the analysis.",
    "Argues that the Euro Area needs \"vigorous, coordinated regulation of its banking and financial systems by a single supervisor.\"",
    "States the policy conclusion succinctly: \"monetary union without banking union will not work.\"",
    "Subjects: Asset prices, Bank credit, Banking, Commercial banks, Economic integration, Economic theory, Financial institutions, Monetary unions, Money, Prices, Supply shocks",
    "Keywords: aggregate demand, aggregate demand shock, aggregate supply, aggregate supply supply curve, aggregate-demand demand shock, aggregate-demand response, Asset prices, Bank credit, canonical aggregate-demand-aggregate-supply model, Commercial banks, countries aggregate demand demand shock, demand disturbance, demand shock, Europe, European Monetary union, hysterisis, long-term aggregate-supply response, Monetary unions, Northern Europe, Optimum currency area, price, sloping aggregate demand curve, supply shock, Supply shocks, textbook aggregate-supply-aggregate-demand model, textbook-style aggregate-supply, WP",
    "**Aftershocks of Monetary Unification: Hysteresis with a Financial Twist, WP/17/55, March 2017**"
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