Australia-New Zealand Currency Union: A Structural Approach
AbstractThis paper compares an Australia-New Zealand currency union to a purely fl oating exchange rate regime in the context of a structural, two-country open economy model. Micro-foundations support policy assessment by facilitating direct calculation of household welfare. Analysis focuses on changing business cycle volatilities; the role of risk is not considered. At benchmark calibration currency union is welfare reducing for both Australia and New Zealand. Sensitivity analyses reveal these results to be qualitatively robust over alternative degrees of shock correlation and shock transmission.
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Bibliographic InfoPaper provided by University of Adelaide, School of Economics in its series School of Economics Working Papers with number 2010-18.
Length: 34 pages
Date of creation: Aug 2010
Date of revision:
currency union; welfare analysis; exchange rate regime; Australia; New Zealand;
Find related papers by JEL classification:
- F22 - International Economics - - International Factor Movements and International Business - - - International Migration
- F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
- F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-09-03 (All new papers)
- NEP-CBA-2010-09-03 (Central Banking)
- NEP-MON-2010-09-03 (Monetary Economics)
- NEP-OPM-2010-09-03 (Open Economy Macroeconomic)
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