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This paper investigates the impact of the asymmetric shocks within a currency union in a framework that takes account of the zero bound constraint on policy rates, and also allows for constraints on fiscal policy. In this environment, we document that the usual optimal currency argument showing...
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' inflation aversion and exit costs …
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fiscal transfers in smoothing the adjustment of the economy hit by the shock …
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union in response to the COVID-19 shock. The pandemic is modelled as a mix of recessionary demand and supply shocks …
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