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Australia-New Zealand Currency Union: A Structural Approach

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  • Daisy McGregor

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    (School of Economics, University of Adelaide)

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    Abstract

    This 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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    File URL: http://www.economics.adelaide.edu.au/research/papers/doc/wp2010-18.pdf
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    Bibliographic Info

    Paper provided by University of Adelaide, School of Economics in its series School of Economics Working Papers with number 2010-18.

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    Length: 34 pages
    Date of creation: Aug 2010
    Date of revision:
    Handle: RePEc:adl:wpaper:2010-18

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    Postal: Adelaide SA 5005
    Phone: (618) 8303 5540
    Web page: http://www.economics.adelaide.edu.au/
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    Related research

    Keywords: currency union; welfare analysis; exchange rate regime; Australia; New Zealand;

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