European Monetary Union, Asymmetric Shocks and Inertia
Rebecca Driver and
Simon Wren-Lewis ()
Discussion Papers from University of Exeter, Department of Economics
This paper assesses the scale of the costs of European Monetary Union when shocks are asymmetric. This is done considering time consistent policies within a small theoretical two country model, with parameter values chosen from empirical work. The model builds on earlier work by incoporating a forward looking inflation mechanism. Our results suggest that there are significant costs associated with Monetary Union, particularly when fiscal policy is not used as a stabilisation tool.
Keywords: European Monetary Union; Asymmetric shocks; Inertia (search for similar items in EconPapers)
JEL-codes: F33 F41 F42 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:exe:wpaper:9607
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