Cargando…
Deciding to enter a monetary union : the role of trade and financial linkages /
This paper evaluates the role of trade and financial linkages in the decision to enter a monetary union. We estimate a two-country DSGE model for the U.K. economy and the euro area, and use the model to compute the welfare trade-offs from joining the euro. We evaluate two alternative scenarios. In t...
| Clasificación: | Libro Electrónico |
|---|---|
| Autor principal: | |
| Autor Corporativo: | |
| Otros Autores: | |
| Formato: | Electrónico eBook |
| Idioma: | Inglés |
| Publicado: |
[Washington, D.C.] :
International Monetary Fund,
©2012.
|
| Colección: | IMF working paper ;
WP/12/240. |
| Temas: | |
| Acceso en línea: | Texto completo |
| Sumario: | This paper evaluates the role of trade and financial linkages in the decision to enter a monetary union. We estimate a two-country DSGE model for the U.K. economy and the euro area, and use the model to compute the welfare trade-offs from joining the euro. We evaluate two alternative scenarios. In the first one, we consider a reduction of trade costs that occurs after the adoption of a common currency. In the second, we introduce interest rate spread shocks of the same magnitude as the ones observed during the recent debt crisis in Europe. The reduction of trade costs generates a net welfare gain of 0.9 percent of life-time consumption, while the increased interest rate spread volatility generates a net welfare cost of 2.9 percentage points. The welfare calculation suggests two ways to preserve the welfare gains in a monetary union: ensuring fiscal and financial stability that reduces macroeconomic country risk, and increasing wage flexibility such that the economy adjusts to external shocks faster. |
|---|---|
| Notas: | Title from PDF title page (IMF Web site, viewed October 5, 2012). "Institute for Capacity Development." "October 2012." |
| Descripción Física: | 1 online resource (52 pages) |
| Bibliografía: | Includes bibliographical references. |
| ISBN: | 9781475512434 1475512430 1475511434 9781475511437 1475512252 9781475512250 1475512260 9781475512267 |