Deficient EMU’s Tasks: As to Asymmetric Transmission Effects of An United Eurosystem’s Monetary Policy

Abstract

Abstract （399words） This paper aims to clarify and partially solve what tasks ongoing EMU has actually confronted since its establishment, mainly focusing on clarifying asymmetric transmission effects of an united Eurosystem’s monetary policy and on finding conditions of establishing value convergence among EMU and/or EU. Research design of this paper bases on both theoretical innovations （Control Engineering to achieve convergence） and empirically verifiable methods （Panel Fixed VARSARAR model: Panel Fixed Effects Vector AutoRegressive and Spatial AutoRegressive with Additional AutoRegressive Error Model）, which enables us to discuss EMU’s convergence tasks quantitatively. Accordingly, this paper consists of two parts. One is a verification part of EMU’s interrelated transmission effects of monetary policy, which clarifies how we can explain its asymmetric effects among EMU utilizing direct transmission and spatial indirect effects. Asymmetric effects of an united monetary policy have stemmed from idiosyncrasy of economic structures, spatial spillovers of its economic policy and human-made institutional spatial customs governing EMU and Euro among within and occasionally without EMU member states. This paper verifies whether inclusive theory of monetary policy explains variations of real and interrelated EMU’s convergent criterion indicators by which monetary channels have affected HICP and fiscal resilience by such as Quantitative Easing and Fiscal Theory of the Price Level （FTPL） channels. The other is a part of establishment conditions of multibody-made convergence system through control by human utilizing methods of Control Engineering or state-space model, which enables us to lead EMU from divergence toward convergence of European values. This paper also discusses how to procced EMU’s policy convergence by human-made innovations through diagonalization of both direct and indirect matrix through introduction of single-peakedness or stratification of national priority issues among EMU members or Euro, which means that EMU’s or EU’s convergence of values needs some form of stratification without fail. The results of this paper are as follows: VARSARAR model implies that indirect spatial lags which seem to represent crisis-driven fragility and distance-based neglectedness as core-periphery structures within the EU, and among-countries-linked financial contagion in Europe that are possibly but not completely verified as background reasons of distance-based European spatial lags, have actually large effects on inflation and fiscal position during crisis, and have also less effects on them after mitigation of the European crisis. Also, Control Engineering implies that One Europe necessarily requires stratification of member states’ sovereignty or euro in order to proceed and establish convergence of European view of values, say EMU and Euro.