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Vincent Duwicquet, Jacques Mazier (2010-11) Financial integration and macroeconomic adjustments in a monetary union”, Journal of Post Keynesian Economics, vol. 33, n. 2, pp. 331-368
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Abstract: In a monetary union, like the euro zone, adjustments facing asymmetric evolutions are more difficult due to fixed intra-European exchange rates. Well-integrated capital markets, with portfolio diversification and intrazone credit, would constitute a powerful adjustment mechanism, according to the “international risk sharing” approach. A different approach is adopted, based on a “stock-flow consistent” model of a monetary union along the lines of Godley and Lavoie (2007). Two results can be underlined. Holding foreign assets has a stabilizing role, but the capital income stabilizing coefficient seems small. By contrast, intrazone credit seems to have no specific stabilization effects.