Joining the European Monetary Union - Comparing First and Second Generation Open Economy Models
AbstractWe log-linearise the Dellas and Tavlas (DT) model of monetary union and solve it analytically. We find that the intuition of optimal currency analysis of DT's second generation open economy model is essentially the same as that of first generation models. Monetary union results in no welfare loss if its member states are symmetric. However, asymmetry causes loss in welfare both due to the failure of the union policy to deal suitably with a country's asymmetric shocks and due to an active monetary policy by union in pursuit of its distinct objectives. The asymmetry in DT is largely due to the differing wage rigidities across countries.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 5615.
Date of creation: Apr 2006
Date of revision:
Contact details of provider:
Postal: Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ.
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820
Find related papers by JEL classification:
- E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
- 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-2006-04-22 (All new papers)
- NEP-CBA-2006-04-22 (Central Banking)
- NEP-MAC-2006-04-22 (Macroeconomics)
- NEP-MON-2006-04-22 (Monetary Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Dellas, Harris & Tavlas, George, 2003.
"Wage Rigidity and Monetary Union,"
CEPR Discussion Papers
3679, C.E.P.R. Discussion Papers.
- Minford, Patrick, 1995. "Other people's money: Cash-in-advance microfoundations for optimal currency areas," Journal of International Money and Finance, Elsevier, vol. 14(3), pages 427-440, June.
- Canzoneri, Matthew B. & Cumby, Robert E. & Diba, Behzad T., 2005.
"The need for international policy coordination: what's old, what's new, what's yet to come?,"
Journal of International Economics,
Elsevier, vol. 66(2), pages 363-384, July.
- Matthew B. Canzoneri & Robert E. Cumby & Behzad T. Diba, 2002. "The Need for International Policy Coordination: What's Old, What's New, What's Yet to Come?," NBER Working Papers 8765, National Bureau of Economic Research, Inc.
- Patrick Minford & Eric Nowell & Bruce Webb, 2003. "Nominal Contracting and Monetary Targets -- Drifting into Indexation," Economic Journal, Royal Economic Society, vol. 113(484), pages 65-100, January.
- Patrick Minford & David Meenagh & Bruce Webb, 2004. "Britain and EMU: Assessing the Costs in Macroeconomic Variability," The World Economy, Wiley Blackwell, vol. 27(3), pages 301-358, 03.
- Laurent Molinier & Christel Castelli & Eric Bauvin & Xavier Rebillard & Michel Soulié & Jean-Pierre Daurès & Pascale Grosclaude, 2011. "Cost study of the clinical management of prostate cancer in France: results on the basis of population-based data," The European Journal of Health Economics, Springer, vol. 12(4), pages 363-371, August.
- David Meenagh & Patrick Minford & Eric Nowell & Prakriti Sofat & Naveen Srinivasan, 2007. "Are the facts of UK inflation persistence to be explained by nominal rigidity or changes in monetary regime?," WEF Working Papers 0028, ESRC World Economy and Finance Research Programme, Birkbeck, University of London.
- Meenagh, David & Minford, Patrick & Nowell, Eric & Sofat, Prakriti & Srinivasan, Naveen, 2008.
"Can the Facts of UK Inflation Persistence be Explained by Nominal Rigidity?,"
CEPR Discussion Papers
6834, C.E.P.R. Discussion Papers.
- Meenagh, David & Minford, Patrick & Nowell, Eric & Sofat, Prakriti & Srinivasan, Naveen, 2009. "Can the facts of UK inflation persistence be explained by nominal rigidity?," Economic Modelling, Elsevier, vol. 26(5), pages 978-992, September.
- Meenagh, David & Minford, Patrick & Nowell, Eric & Sofat, Prakriti & Srinivasan, Naveen, 2008. "Can the Facts of UK Inflation Persistence be Explained by Nominal Rigidity?," Cardiff Economics Working Papers E2008/7, Cardiff University, Cardiff Business School, Economics Section, revised Apr 2010.
- Sánchez, Marcelo, 2008. "Monetary stabilisation in a currency union of small open economies," Working Paper Series 0927, European Central Bank.
- Agénor, Pierre-Richard & Aizenman, Joshua, 2011.
"Capital market imperfections and the theory of optimum currency areas,"
Journal of International Money and Finance,
Elsevier, vol. 30(8), pages 1659-1675.
- Agenor, Pierre-Richard & Aizenman, Joshua, 2008. "Capital Market Imperfections and the Theory of Optimum Currency Areas," Santa Cruz Department of Economics, Working Paper Series qt7668j94x, Department of Economics, UC Santa Cruz.
- Pierre-Richard Agenor & Joshua Aizenman, 2008. "Capital Market Imperfections and the Theory of Optimum Currency Areas," NBER Working Papers 14088, National Bureau of Economic Research, Inc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.