On the benefits of a monetary union: does it pay to be bigger?
This paper revisits the question of the appropriate domain of a currency area using a New-Keynesian open economy model in which the world is split into two areas, each framed as a continuum of small open regions. We show that the adoption of a common currency like the euro can be beneficial for the...
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| Format: | Article |
| Language: | English |
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2015-11.
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| Online Access: | Get fulltext Get fulltext |
| LEADER | 01333 am a22001333u 4500 | ||
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| 001 | 382369 | ||
| 042 | |a dc | ||
| 100 | 1 | 0 | |a Forlati, Chiara |e author |
| 245 | 0 | 0 | |a On the benefits of a monetary union: does it pay to be bigger? |
| 260 | |c 2015-11. | ||
| 856 | |z Get fulltext |u https://eprints.soton.ac.uk/382369/1/ForlatiRevision15.pdf | ||
| 856 | |z Get fulltext |u https://eprints.soton.ac.uk/382369/2/AppendixForlati15.pdf | ||
| 520 | |a This paper revisits the question of the appropriate domain of a currency area using a New-Keynesian open economy model in which the world is split into two areas, each framed as a continuum of small open regions. We show that the adoption of a common currency like the euro can be beneficial for the members of the monetary union, since the spill-over effects generated by the inflationary policies of the small open economies are likely to outweigh the costs of not tailoring monetary policy to country-specific shocks. We also show that while the enlargement of the monetary union to another group of small open economies can bring about welfare gains for all countries involved, monetary integration of two large economies, such as the euro area and the U.S., will not. These findings can help to rationalize the process of the creation and enlargement of multi-country currency areas like the eurozone. | ||
| 655 | 7 | |a Article | |