Macro Seminars Amsterdam

Jonathan Hoddenbagh (Johns Hopkins University, United States)
Friday, 16 March 2018

We derive the optimal scal transfer scheme for countries in a monetary union to oset the welfare losses resulting from asymmetric shocks and nominal rigidities. Optimal transfers involve a tradeo between reducing national output gaps and the provision of consumption insurance across countries, where the weight of the former increases relative to the latter as consumption home bias rises. The welfare gains from optimal transfers increase in both home bias and export substitutability. When these parameters are calibrated to the data for specic euro area countries, the welfare gains from optimal transfers are as high as 3.6% of permanent consumption. Joint with Mikhail Dmitriev.

Please notice that there are two macro seminars taking place on March 16. Click here to view the other seminar.