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Helping with the Homework: Support Mechanisms for Uncertain Reforms in a Monetary Union

  • Carsten Hefeker EMAIL logo


A lack of structural reforms is often considered as a major problem in many member countries of EMU. This lack is arguably partly due to uncertainty about outcomes and a disregard for how policies spill over to other countries. Monetary union can reinforce this underprovision of structural reforms. Because centralization of structural policies is politically not feasible, I discuss subsidies for reforms and insurance against negative outcomes as alternative mechanisms that increase reform efforts. The paper derives the optimal use of those mechanisms and discusses their implementability.

JEL Classification: F33; F42; F45; H77


I am grateful to the referee for constructive comments and suggestions.


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Article note

This article is part of the special issue “20 Years of European Monetary Union” published in the Journal of Economics and Statistics. Access to further articles of this special issue can be obtained at

Received: 2018-09-27
Revised: 2018-12-21
Accepted: 2019-02-03
Published Online: 2019-08-24
Published in Print: 2019-09-25

© 2019 Oldenbourg Wissenschaftsverlag GmbH, Published by De Gruyter Oldenbourg, Berlin/Boston

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