Monetary Union, Even Higher Integration, or Back to National Currencies?

George Economides, Apostolis Philippopoulos and Petros Varthalitis ()

No 5762, CESifo Working Paper Series from CESifo

Abstract: This paper quantifies the welfare differences among a monetary union, flexible exchange rates (economic disintegration) and a monetary plus fiscal transfer union (higher economic integration). The vehicle of analysis is a medium-scale New Keynesian DSGE model consisting of two heterogeneous countries. The model is solved using data from Germany and Italy. Our solutions imply that a switch to flexible exchange rates and independent monetary policies would have negligible welfare implications. A similar result applies when we add interregional fiscal tranfers as insurance. By contrast, the addition of fiscal tranfers as redistribution has non-trivial implications and these depend crucially on whether such one-sided transfers trigger moral hazard behavior or not.

Keywords: fiscal union; monetary union; New Keynesian; DSGE (search for similar items in EconPapers)
JEL-codes: E60 F30 H60 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
https://www.cesifo.org/DocDL/cesifo1_wp5762.pdf (application/pdf)

Related works:
Journal Article: Monetary Union, Even Higher Integration, or Back to National Currencies? (2016)
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:ces:ceswps:_5762

Access Statistics for this paper

More papers in CESifo Working Paper Series from CESifo Contact information at EDIRC.
Bibliographic data for series maintained by Klaus Wohlrabe ().