The theory of optimal currency areas stresses that a single currency zone should have symmetry across shocks and structures. What happens if the monetary transmission mechanisms differ so that a common monetary policy has different effects in different places? Using a fully specified econometric...

The theory of optimal currency areas states that a single currency zone should have symmetry of shocks and structures across regions. Research on monetary union in Europe has either assumed these conditions to hold close enough not to cause problems, or has focussed on asymmetries in shocks. But...

Conventional wisdom has it that increasing price or exchange rate uncertainty will depress investment. Using the Dixit-Pindyck model, we find that there are situations where this does happen; and situations where it does not – i.e. increasing uncertainty leads to more investment. It depends...

There is a presumption in the literature that price or exchange rate uncertainty, or uncertainty in the monetary conditions underlying them, will have a negative effect on investment. Some argue that this negative effect will be extended by imperfect competition. However, models of...