Participation in a Currency Union
In any voluntary cooperative agreement, the potential gain from deviation should determine the minimum influence required over common decision-making. This paper begins by observing that a highly asymmetric distribution of power between two partners is not sustainable if the choice variables are strategic substitutes. It then studies a simple general-equilibrium model of a monetary union and shows that a small economy will not take part in the agreement unless it can secure influence that is more than proportional to its size and a transfer of seigniorage revenues in its favor. Copyright 1992 by American Economic Association.
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Volume (Year): 82 (1992)
Issue (Month): 4 (September)
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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.:
- Bernheim, B. Douglas & Whinston, Michael D., 1987. "Coalition-Proof Nash Equilibria II. Applications," Journal of Economic Theory, Elsevier, vol. 42(1), pages 13-29, June.
- Helpman, Elhanan, 1981.
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"Management of a Common Currency,"
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qt5jv1h7nt, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
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- Aizenman, Joshua, 1992. "Competitive Externalities and the Optimal Seigniorage," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 24(1), pages 61-71, February.
- John Kareken & Neil Wallace, 1981. "On the Indeterminacy of Equilibrium Exchange Rates," The Quarterly Journal of Economics, Oxford University Press, vol. 96(2), pages 207-222.
- Willem H. Buiter & Jonathan Eaton, 1983. "International Balance of Payments Financing and Adjustment," NBER Working Papers 1120, National Bureau of Economic Research, Inc.
- Cohen, Daniel & Wyplosz, Charles, 1989. "The European Monetary Union: An Agnostic Evaluation," CEPR Discussion Papers 306, C.E.P.R. Discussion Papers.
- Bernheim, B. Douglas & Peleg, Bezalel & Whinston, Michael D., 1987. "Coalition-Proof Nash Equilibria I. Concepts," Journal of Economic Theory, Elsevier, vol. 42(1), pages 1-12, June.
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