Type of Publication: Article in Journal

Dynamische Effekte symmetrischer Nachfrage- und Angebotspolitiken in einer asymmetrischen Währungsunion

Clausen, V.; Wohltmann, H. W.
Title of Journal:
Jahrbücher für Nationalökonomie und Statistik, Bd. 222
Publication Date:
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The paper analyzes the dynamic effects of anticipated symmetric demand and supply side policies within the framework of a macroeconomic model of a small monetary union, which is characterized by asymmetric wage adjustment equations of Phillips‘ curve type. It is shown that an anticipated simultaneous increase in government expenditure in both member countries leads to a short-run fall in output and to temporary divergences in output developments. From the perspective of the country with the lower wage flexibility the output differential is positive in the short-run. In the course of the subsequent adjustment process the relative cyclical position is reversed. The difference between the two member country outputs changes its sign due to changes in the internal and external terms of trade. Similar results hold with a simultaneous reduction of labor extra-costs in both countries. Compared with a symmetric increase in government expenditure the development of the output differential is essentially opposite in sign.