Structural Convergence under Reversible and Irreversible Monetary Unification

Roel Beetsma and Henrik Jensen

No 99-06, EPRU Working Paper Series from Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics

Abstract: We explore endogenous monetary unification in the context of a model in which a country with serious structural distortions (and, hence, high inflation) is admitted into a monetary union once its economic structure has converged sufficiently towards that of the existing participants. If unification is reversible, so that the new entrant can always be forced to leave the union again later, convergence stops for a while after the high inflation country has joined. With irreversible unification, temporary divergence occurs, and unification is most likely to be delayed.

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Related works:
Journal Article: Structural convergence under reversible and irreversible monetary unification (2003)
Working Paper: Structural Convergence Under Reversible and Irreversible Monetary Unification (1999)
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