Joining the European Monetary Union—Comparing First and Second Generation Open Economy Models

Vo Phuong Mai Le and A. Patrick Minford

Open Economies Review, 2006, vol. 17, issue 3, 296 pages

Abstract: We log-linearise the Dellas and Tavlas (DT) model of monetary union and solve it analytically. We find that the intuition of optimal currency area analysis of DT’s second generation open economy model is essentially the same as that of first generation models. Monetary union results in no welfare loss if its member states are symmetric. However, asymmetry causes loss in welfare both due to the failure of the union policy to deal suitably with a country’s asymmetric shocks and due to an active monetary policy by the union in pursuit of its distinct objectives. The asymmetry in DT is largely due to the differing wage rigidities across countries. Copyright Springer Science + Business Media, LLC 2006

Keywords: monetary union; representative agent model; multi-country model; wage rigidity; asymmetry (search for similar items in EconPapers)
Date: 2006
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
http://hdl.handle.net/10.1007/s11079-006-9050-0 (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Joining the European Monetary Union - Comparing First and Second Generation Open Economy Models (2006)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:openec:v:17:y:2006:i:3:p:281-296

Ordering information: This journal article can be ordered from
http://www.springer. ... cs/journal/11079/PS2

DOI: 10.1007/s11079-006-9050-0

Access Statistics for this article

Open Economies Review is currently edited by G.S. Tavlas

More articles in Open Economies Review from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().