On the benefits of a monetary union: Does it pay to be bigger?

• 成果类型: Article
• 署名作者: Forlati, Chiara
• 署名单位: University of Southampton
• 刊物名称: JOURNAL OF INTERNATIONAL ECONOMICS
• ISSN/ISSBN: 0022-1996
• DOI: 10.1016/j.jinteco.2015.07.001
• 发表日期: 2015
• 页码: 448-463
• 关键词: New Keynesian open economy macroeconomics; optimal monetary policy; Currency area; Terms-of-trade externality

摘要

This paper revisits the question of the appropriate domain of a currency area using a New-Keynesian open economy model in which the world is split into two areas, each framed as a continuum of small open regions. We show that the adoption of a common currency like the euro can be beneficial for the members of the monetary union, since the spill-over effects generated by the inflationary policies of the small open economies are likely to outweigh the costs of not tailoring monetary policy to country-specific shocks. We also show that while the enlargement of the monetary union to another group of small open economies can bring about welfare gains for all countries involved, monetary integration of two large economies, such as the euro area and the U.S., will not. These findings can help to rationalize the process of the creation and enlargement of multi-country currency areas like the eurozone. (C) 2015 Elsevier B.V. All rights reserved.