Monetary Integration, Stochastic Inflation Preferences and the Value of Waiting
Using a simple two-country model where policymakers minimize the continuous-time equivalence of a Barro-Gordon-type loss function over inflation, we examine the value of the option to give up monetary independence in favor of monetary integration when the national preference parameters associated with a inflationary surprise follow correlated geometric Brownian motions.
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|Date of creation:||1999|
|Contact details of provider:|| Postal: Edgbaston, Birmingham, B15 2TT|
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