Monetary Union, Entry Conditions and Economic Reform
AbstractThis paper models the behaviour of a potential entrant into a monetary union where there is an inflation entry condition. In addition to making a monetary policy decision during a qualifying period, the potential entrant must make a decision about structural reform. The paper shows that the entry condition can have two undesirable effects. First, it can lead to multiple equilibria because inflationary expectations acquire a self-fulfilling property. Second, the entry condition can lead to a reduction in the amount of reform. This is because the entry condition reduces inflationary expectations and thus reduces the incentive to reform.
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Bibliographic InfoPaper provided by Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics in its series EPRU Working Paper Series with number 00-03.
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Other versions of this item:
- Ozkan, F Gulcin & Sibert, Anne & Sutherland, Alan, 1997. "Monetary Union, Entry Conditions and Economic Reform," CEPR Discussion Papers 1720, C.E.P.R. Discussion Papers.
- F. Gulcin Ozkan & Anne Sibert & Alan Sutherland, . "Monetary Union, Entry Conditions and Economic Reform," Discussion Papers 97/15, Department of Economics, University of York.
- F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
- F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
This paper has been announced in the following NEP Reports:
- NEP-ALL-2003-05-15 (All new papers)
- NEP-EEC-2003-05-15 (European Economics)
- NEP-IFN-2003-05-15 (International Finance)
- NEP-MAC-2003-05-15 (Macroeconomics)
- NEP-MON-2003-05-15 (Monetary Economics)
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