Australia-New Zealand Currency Union: A Structural Approach

Daisy McGregor ()
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Daisy McGregor: School of Economics, University of Adelaide

No 2010-18, Adelaide Economics Working Papers from Adelaide University, School of Economics

Abstract: This paper compares an Australia-New Zealand currency union to a purely fl oating exchange rate regime in the context of a structural, two-country open economy model. Micro-foundations support policy assessment by facilitating direct calculation of household welfare. Analysis focuses on changing business cycle volatilities; the role of risk is not considered. At benchmark calibration currency union is welfare reducing for both Australia and New Zealand. Sensitivity analyses reveal these results thttps://media.adelaide.edu.au/economics/rees of shock correlation and shock transmission.

Keywords: currency union; welfare analysis; exchange rate regime; Australia; New Zealand (search for similar items in EconPapers)
JEL-codes: F22 F33 F41 F42 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2010-08
New Economics Papers: this item is included in nep-cba, nep-mon and nep-opm
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