Currency Unions and International Assistance
This paper considers a simple stochastic model of international trade with three countries. Two of the tree countries are in an economic union. Comparisons are made between equilibrium welfare for these two countries under fixed and flexible exchange rate regimes. Within the model it is shown that flexible exchange rate regimes generate greater welfare. However, we then consider comparisons of welfare when the two countries also engage in some international assistance in order to share risk. Such risksharing is limited by enforcement constraints of cross border assistance. It is shown that, when one takes into account risk-sharing and limited commitment, fixed exchange rate regimes associated with a currency area can dominate flexible exchange rate regimes, which reverses the standard result.
|Date of creation:||2009|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: (+352) 46 66 44
Fax: (+352) 46 66 44 ext 633
Web page: http://wwwen.uni.lu/research/fdef/crea
More information through EDIRC
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.:
- Thomas, Jonathan & Worrall, Tim, 1988. "Self-enforcing Wage Contracts," Review of Economic Studies, Wiley Blackwell, vol. 55(4), pages 541-54, October.
- Forni, Mario & Reichlin, Lucrezia, 1999.
"Risk and potential insurance in Europe,"
European Economic Review,
Elsevier, vol. 43(7), pages 1237-1256, June.
- Perotti, Roberto & Spolaore, Enrico & Alesina, Alberto, 1995.
"Together or Separately? Issues on the Costs and Benefits of Political and Fiscal Unions,"
4553017, Harvard University Department of Economics.
- Alesina, Alberto & Perotti, Roberto & Spolaore, Enrico, 1995. "Togetheror separately? Issues on the costs and benefits of political and fiscal unions," European Economic Review, Elsevier, vol. 39(3-4), pages 751-758, April.
- DREZE, Jacques, 2000.
"Economic and social security in the twenty-first century, with attention to Europe,"
CORE Discussion Papers
2000015, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Dreze, Jacques H, 2000. " Economic and Social Security in the Twenty-First Century, with Attention to Europe," Scandinavian Journal of Economics, Wiley Blackwell, vol. 102(3), pages 327-48, June.
- DREZE, Jacques H., . "Economic and social security in the twenty-first century, with attention to Europe," CORE Discussion Papers RP -1482, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Danthine, Jean-Pierre & Hunt, Jennifer, 1992.
"Wage Bargaining Structure, Employment and Economic Integration,"
CEPR Discussion Papers
694, C.E.P.R. Discussion Papers.
- Danthine, Jean-Pierre & Hunt, Jennifer, 1994. "Wage Bargaining Structure, Employment and Economic Integration," Economic Journal, Royal Economic Society, vol. 104(424), pages 528-41, May.
- Jean-Pierre DANTHINE & Jennifer HUNT, 1992. "Wage Bargaining Structure, Employment and Economic Integration," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) 9204, Université de Lausanne, Faculté des HEC, DEEP.
- Kenneth R. French & James M. Poterba, 1991.
"Investor Diversification and International Equity Markets,"
NBER Working Papers
3609, National Bureau of Economic Research, Inc.
- French, Kenneth R & Poterba, James M, 1991. "Investor Diversification and International Equity Markets," American Economic Review, American Economic Association, vol. 81(2), pages 222-26, May.
When requesting a correction, please mention this item's handle: RePEc:luc:wpaper:09-01. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Elisa Ferreira)
If references are entirely missing, you can add them using this form.