Joining the European Monetary Unionâ€”Comparing First and Second Generation Open Economy Models
We log-linearise the Dellas and Tavlas (DT) model of monetary union and solve it analytically. We find that the intuition of optimal currency area analysis of DTâ€™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 countryâ€™s asymmetric shocks and due to an active monetary policy by the union in pursuit of its distinct objectives. The asymmetry in DT is largely due to the differing wage rigidities across countries. Copyright Springer Science + Business Media, LLC 2006
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- Harris Dellas & George Tavlas, 2005.
"Wage Rigidity and Monetary Union,"
Royal Economic Society, vol. 115(506), pages 907-927, October.
- Harris Dellas & George Tavlas, 2004. "Wage Rigidity and Monetary Union," Working Papers 12, Bank of Greece.
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- Harris Dellas & George Tavlas, 2002. "Wage Rigidity and Monetary Union," Diskussionsschriften dp0219, Universitaet Bern, Departement Volkswirtschaft.
- 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.
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