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Effects of Monetary Unions on Inequalities (Para Birliklerinin Esitsizlikler Uzerindeki Etkileri)

  • Timur Hulagu
  • Devrim Ikizler

This paper analyzes how forming a monetary union affects consumption and earnings inequalities caused by adopting a common currency. We use a two country overlapping-generations model to investigate these effects. When countries choose to form a monetary union, the country with higher initial inflation will deffnitely experience an increase in its inequalities. In the country with lower initial inflation, however, inequalities might go in either direction since the inflationary effect of uniting its monetary policy with a high inflation country can dominate the reducing effect of vanished trade frictions on inflation.

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Paper provided by Research and Monetary Policy Department, Central Bank of the Republic of Turkey in its series Working Papers with number 1014.

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Date of creation: 2010
Date of revision:
Handle: RePEc:tcb:wpaper:1014
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  1. Andrés Erosa & Gustavo Ventura, 2000. "On Inflation as a Regressive Consumption Tax," UWO Department of Economics Working Papers 20001, University of Western Ontario, Department of Economics.
  2. Bhattacharya, Joydeep & Haslag, Joseph & Martin, Antoine, 2004. "Heterogeneity, Redistribution, and the Friedman Rule," Staff General Research Papers 11371, Iowa State University, Department of Economics.
  3. Stefania Albanesi, 2002. "Inflation and Inequality," Macroeconomics 0201002, EconWPA.
  4. Celentani, Marco & Conde-Ruiz, José Ignacio & Desmet, Klaus, 2004. "Inflation in Open Economies with Complete Markets," CEPR Discussion Papers 4385, C.E.P.R. Discussion Papers.
  5. Russell Cooper & Hubert Kempf, 2003. "Commitment and the Adoption of a Common Currency," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(1), pages 119-142, February.
  6. Matthias Doepke & Martin Schneider, 2006. "Inflation and the Redistribution of Nominal Wealth," Journal of Political Economy, University of Chicago Press, vol. 114(6), pages 1069-1097, December.
  7. Albanesi, Stefania, 2003. "Optimal and Time-Consistent Monetary and Fiscal Policy with Heterogeneous Agents," CEPR Discussion Papers 3713, C.E.P.R. Discussion Papers.
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