Can fixed exchange rate regimes cause output divergence among member states? We show that such divergence is a long-run equilibrium characteristic of a two-region model with fixed exchange rates, heterogeneous labor markets, and endogenous growth. Under flexible exchange rates, monetary policy...

Can fixed exchange rate regimes cause output divergence among member states? We show that such divergence is a long-run equilibrium characteristic of a two-region model with fixed exchange rates, heterogeneous labor markets, and endogenous growth. Under flexible exchange rates, monetary policy...

We estimate the contribution of the American precious metal windfall to West Europe's growth performance in the early modern period. The exogenous nature of American money arrivals allows for identification of monetary effects. We find that more than half of West Europe's growth can be...