One Size Must Fit All: National Divergences in a Monetary Union
Should a common central bank in a heterogeneous monetary union base its decisions on EU-wide averages of economic variables or on national welfare losses? A central bank that minimizes the sum of national welfare losses reacts less to common shocks. Under certain parameter constellations this leads to higher average union-wide expected welfare and it might thus be preferable that decision-making is dominated by national representatives. Countries with a transmission mechanism far from the average benefit from an orientation on national welfare losses. For countries with a transmission mechanism close to the average, welfare can be lower in this case. Copyright Verein fü Socialpolitik and Blackwell Publishers Ltd 2002.
Year of publication: |
2002
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Authors: | Gros, Daniel ; Hefeker, Carsten |
Published in: |
German Economic Review. - Verein für Socialpolitik - VfS. - Vol. 3.2002, 3, p. 247-262
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Publisher: |
Verein für Socialpolitik - VfS |
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