Teaching economics of monetary union with the IS-MP-PC model

Ivo J.M. Arnold

International Review of Economics Education, 2023, vol. 44, issue C

Abstract: This paper explains how the three-equation IS-MP-PC-model can be adapted to discuss macroeconomic adjustment in a monetary union. It introduces a two-country version that is used to illustrate the difficulties of macroeconomic adjustment in the presence of asymmetric demand and financial shocks. The level of analysis does not go beyond the level of a course in introductory macroeconomics. The adaption can be used by instructors in euro area countries to bridge the gap between the standard model and the macroeconomic issues that these countries face or by any instructor who wishes to analyze shocks in regions sharing the same currency. It also allows instructors to debate current policy issues with their students and thus motivate them for the field.

Keywords: Undergraduate macroeconomics; IS-MP-PC model; Monetary Union (search for similar items in EconPapers)
JEL-codes: A22 E32 E43 E58 F45 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ireced:v:44:y:2023:i:c:s1477388023000178

DOI: 10.1016/j.iree.2023.100276

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