Small Countries in Monetary Unions: A Two-Tier Model

Jorge Braga de Macedo

No 1634, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: In a previous analysis of the West African Monetary Union, Macedo(1985a), size is taken to be a major structural characteristic of a country in the sense that large countries are not affected by disturbances originating in small countries but small countries are affected by large countries' domestic disturbances. In this paper, we generalize some of the results and present the structure of the model in moredetail. Using a four-country, two-tier macroeconomic model, it is shown that the pseudo-exchange rate union of the two small countries with the large partner has no effect on their real exchange rates but affects their price levels, whereas a full monetary union requires in principle a transfer from the large partner in the union. The allocation of this transfer between the two small countries by their common central bank will have real effects when the allocation rule differs from the steady-state monetary distribution.

Date: 1985-06
Note: ITI IFM
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published as Macedo, Jorge Braga de. "Small Countries in Monetary Unions: A Two-Tier Model," Journal of Economic Dynamics and Control, February 1987.

Downloads: (external link)
http://www.nber.org/papers/w1634.pdf (application/pdf)

Related works:
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:nbr:nberwo:1634

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w1634

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().