Monetary Integration and Economic Convergence

Anne Sibert

No 1561, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Recent research in contract theory views ownership as a substitute for complete contracts. In this paper this approach is applied to monetary integration. Countries face a coordination problem when conducting monetary policy: negative spillovers ensure uncoordinated policy generates too high inflation. Ex ante, policy-makers can undertake politically costly economic reform. This has a positive spillover because it improves the outcome of the monetary policy game. Ex post, contracting over policy may be possible, however, it is supposed that ex-ante contracting over reform and monetary policy, is not. This paper analyses when monetary union is a good substitute for this inability to commit.

Keywords: Economic Integration; Montetary Union; Policy Coordination (search for similar items in EconPapers)
JEL-codes: E61 F33 F42 (search for similar items in EconPapers)
Date: 1997-01
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Citations: View citations in EconPapers (6)

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Working Paper: Monetary Integration and Economic Convergence (1996)
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