Asymmetric Shocks and Monetary Policy in a Currency Union

Philip Lane

Scandinavian Journal of Economics, 2000, vol. 102, issue 4, 585-604

Abstract: We analyze the conduct of monetary policy in a currency union in the face of asymmetric shocks. In particular, we compare the stabilization properties of a currency union versus alternative exchange rate arrangements. The relative performance of a currency union is shown to depend on the extent of economic integration in patterns of consumption and production and on the relative weights placed on price stability versus employment stability in the monetary authority's objective function. JEL classification: F33; F40

Date: 2000
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