In this paper we examine the international implications of monetary union in the European Community (EMU) and the associated international costs and benefits. We consider prospective changes in international institutions, the potential role of the ecu as an international currency, and the...

This paper discusses the conditions under which currency unions would be desirable and viable. We discuss and present new empirical evidence concerning the operation of existing currency unions in federal states and among regional country groupings. In particular, we examine the traditional...

We show how a stability pact based on deficit sanctions eliminates the exacerbation of debt accumulation that may arise from monetary unification. Moreover, by making sanctions contingent upon the economic situation of countries, the stability pact provides for risk sharing. Differences in...

Sovereign risk premia in several euro area countries have risen markedly since 2008, driving up credit spreads in the private sector as well. We propose a New Keynesian model of a two-region monetary union that accounts for this "sovereign risk channel." The model is calibrated to the euro area...

Price and output level convergence between new member states and the existing EU necessarily implies inflation and growth divergence for many years to come. That complicates the conditions for accession to the euro. In this Paper, we focus on debt dynamics for the eight new member states from...

Regional flows of federal taxes and transfers within the United States and Canada are used to analyse long-term fiscal flows (the redistributive element) and short-term responses to regional business cycles (the stabilization element). In the United States, long-run flows amount to 22 cents in...

How does a monetary union work when labour markets are heterogeneous? Since shocks are transmitted via both trade links and the common monetary policy and propagated via labour market responses, it follows that labour market institutions may have not only national but also union-wide...

In this paper we study the relationship between labour market institutions and monetary policy. We use a simple macroeconomic framework to show how optimal monetary policy rules depend on labour institutions (labour adjustment costs, and nominal and real wage rigidity) and social preferences...

This paper analyses the costs and benefits of European monetary unification. The benefits take the form of the reduction in exchange risk, equalization of interest rates, decline in relative price variability and general increase in economic efficiency likely to accompany unification. The costs...

Historical experience suggests that the distribution of monetary policy authority among the members of a monetary union is a key aspect of the design of a central bank constitution. We analyse alternative institutional solutions to that problem with different degrees of centralization of...