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Price Adjustment in Currency Unions

Author

Listed:
  • Michael Bleaney
  • Lin Yin

Abstract

In a rational expectations model, wages and prices should respond more to shocks in currency unions than in soft pegs because of the absence of exchange rate adjustment. Empirical evidence from three currency unions tends to support this hypothesis, but the rate of adjustment is slow.

Suggested Citation

  • Michael Bleaney & Lin Yin, 2015. "Price Adjustment in Currency Unions," Discussion Papers 15/06, University of Nottingham, School of Economics.
    • Handle: RePEc:not:notecp:15/06
    as

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    File URL: https://www.nottingham.ac.uk/economics/documents/discussion-papers/SDP-15-06.pdf
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    References listed on IDEAS

    as
    1. Barro, Robert J. & Gordon, David B., 1983. "Rules, discretion and reputation in a model of monetary policy," Journal of Monetary Economics, Elsevier, vol. 12(1), pages 101-121.
    2. Edwards, Sebastian & Levy Yeyati, Eduardo, 2005. "Flexible exchange rates as shock absorbers," European Economic Review, Elsevier, vol. 49(8), pages 2079-2105, November.
    3. Atish R Ghosh & Mahvash S Qureshi & Charalambos G Tsangarides, 2014. "On the Value of Words: Inflation and Fixed Exchange Rate Regimes," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 62(2), pages 288-322, June.
    4. Michael Bleaney & Manuela Francisco, 2005. "Exchange rate regimes and inflation: only hard pegs make a difference," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 38(4), pages 1453-1471, November.
    5. Atish R Ghosh & Jonathan D Ostry & Mahvash S Qureshi, 2015. "Exchange Rate Management and Crisis Susceptibility: A Reassessment," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 63(1), pages 238-276, May.
    6. Michael Bleaney & Mo Tian, 2014. "Classifying Exchange Rate Regimes by Regression Methods," Discussion Papers 14/02, University of Nottingham, School of Economics.
    7. Mr. Thierry Tressel & Mr. Shengzu Wang, 2014. "Rebalancing in the Euro Area and Cyclicality of Current Account Adjustments," IMF Working Papers 2014/130, International Monetary Fund.
    8. Bleaney, Michael & Bougheas, Spiros & Skamnelos, Ilias, 2008. "A model of the interactions between banking crises and currency crises," Journal of International Money and Finance, Elsevier, vol. 27(5), pages 695-706, September.
    9. Ms. Florence Jaumotte & Piyaporn Sodsriwiboon, 2010. "Current Account Imbalances in the Southern Euro Area," IMF Working Papers 2010/139, International Monetary Fund.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    currency union; exchange rate; price JEL codes: F31;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange

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