Credibility and Seigniorage in a Common Currency Area
AbstractIn the paper we show that common currency areas tend to amplify the inefficiencies associated with lack of credibility of monetary policy. Lack of commitment in redistribution of seigniorage leads to excessive inflation and suboptimal taxation in the Monetary Union. Lack of commitment to inflation creates multiple inefficient equilibria that do not exist in a regime of national monetary independence.
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Bibliographic InfoArticle provided by Blackwell Publishing in its journal Journal of Money, Credit and Banking.
Volume (Year): 34 (2002)
Issue (Month): 4 (November)
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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-2879
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