While the European Monetary Union (EMU) is now a real ity, debate among economists nonetheless continues about the design and desirability of monetary unions.Since an essential element of a monetary union is the delegation of monetary power to a single centralized entity, one of the key issues...

This paper explores the gains to monetary union. We consider a two-country overlapping generations model. Agents work when young and have random tastes over the composition (domestic vs. foreign goods) of old age consumption. In equilibrium, governments require that local currncy be used for...

We analyze financial collapses, such as the one that occurred during the U.S. Great Depression, from the perspective of a monetary model with multiple equilibria. The economy we consider contains financial fragility due to increasing returns to scale in the intermediation process. Intermediaries...