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Monetary Policy Conduct and the Prospects of a Currency Union

Author

Listed:
  • Bednar, N.

    (Facultés universitaires Saint-Louis, Brussels)

  • Monfort, Ph.

    (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))

Abstract

This paper discusses the issue of a currency union between partners differing in the optimal conduct of their national monetary policy. The underlying cause of asymmetry is the extent of the nominal rigidities featured by the economies. We examine the distribution of the gains obtained from this form of coordination and show that there may exist a critical level of asymmetry above which the union proves non-feasable because, for one of the partner, coordination is no longer welfare improving. In this perspective, the extent of asymmetry between countries unambiguously reduces the likelihood of a productive coordination of national monetary policies.

Suggested Citation

  • Bednar, N. & Monfort, Ph., 1998. "Monetary Policy Conduct and the Prospects of a Currency Union," LIDAM Discussion Papers IRES 1998013, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    • Handle: RePEc:ctl:louvir:1998013
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