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

Timur Hulagu and Devrim Ikizler

Working Papers from Research and Monetary Policy Department, Central Bank of the Republic of Turkey

Abstract: 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.

Keywords: Monetary Unions; Inflation; Inequality; Heterogeneity (search for similar items in EconPapers)
JEL-codes: D31 E21 E24 E31 E50 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mon
Date: 2010
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Persistent link: http://EconPapers.repec.org/RePEc:tcb:wpaper:1014

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