Monetary Union, Entry Conditions and Economic Reform

Gulcin Ozkan, Anne Sibert and Alan Sutherland ()

No 1720, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper models the behaviour of a potential entrant into a monetary union where there is an inflation entry condition. In addition to making a monetary policy decision during a qualifying period, the potential entrant must make a decision about structural reform. The paper shows that the entry condition can have two undesirable effects. First, it can lead to multiple equilibria because inflationary expectations acquire a self-fulfilling property. Second, the entry condition can lead to a reduction in the amount of reform. This is because the entry condition reduces inflationary expectations and thus reduces the incentive to reform.

Keywords: Convergence; Entry conditions; Monetary Union (search for similar items in EconPapers)
JEL-codes: F33 F36 (search for similar items in EconPapers)
Date: 1997-11
References: Add references at CitEc
Citations: View citations in EconPapers (12)

Downloads: (external link)
http://www.cepr.org/active/publications/discussion_papers/dp.php?dpno=1720 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Working Paper: Monetary Union, Entry Conditions and Economic Reform
Working Paper: Monetary Union, Entry Conditions and Economic Reform
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:cpr:ceprdp:1720

Ordering information: This working paper can be ordered from
http://www.cepr.org/ ... ers/dp.php?dpno=1720

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().