Regional development and monetary policy: a review of the role of monetary unions, capital mobility and locational effects

Masagus M Ridhwan, Peter Nijkamp and Piet Rietveld

No 7, Serie Research Memoranda from VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics

Abstract: Standard economic theory assumes money to be neutral, at least in the long run, driven by interregional arbitrage and perfect capital mobility. This may easily be used as a justification for regional economists to ignore monetary factors. However, in a world with market imperfections, such arguments are no longer valid. This paper provides a critical review of theoretical arguments and empirical evidence on the issue. Special attention is devoted to asymmetric information problems caused by geographical factors. We conclude that monetary policy and financial markets can have a potentially important role to play in promoting regional development especially in less-developed countries.

Keywords: Regional Finance; Monetary Union; Capital Mobility; Asymmetric Regional Finance; Monetary Union; Capital Mobility; Asymmetric; Information; Economic Geography (search for similar items in EconPapers)
JEL-codes: E44 F15 G14 R51 R58 (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:vua:wpaper:2008-7

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