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Australia-New Zealand Currency Union: A Structural Approach

Author

Listed:
  • Daisy McGregor

    (School of Economics, University of Adelaide)

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 thttps://media.adelaide.edu.au/economics/rees of shock correlation and shock transmission.

Suggested Citation

  • Daisy McGregor, 2010. "Australia-New Zealand Currency Union: A Structural Approach," School of Economics and Public Policy Working Papers 2010-18, University of Adelaide, School of Economics and Public Policy.
    • Handle: RePEc:adl:wpaper:2010-18
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    File URL: http://www.economics.adelaide.edu.au/research/papers/doc/wp2010-18.pdf
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    More about this item

    Keywords

    currency union; welfare analysis; exchange rate regime; Australia; New Zealand;
    All these keywords.

    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

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