Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/22083 
Year of Publication: 
2004
Series/Report no.: 
Tübinger Diskussionsbeiträge No. 284
Publisher: 
Eberhard Karls Universität Tübingen, Wirtschaftswissenschaftliche Fakultät, Tübingen
Abstract: 
This paper investigates the implications of alternative scale variables of money demand for the comparison of a flexible exchange rate regime with a monetary union in a NOEM setup. The welfare evaluation of exchange rate regimes depends on the exchange rate response under the flexible regime. When the scale variable is private consumption, a domestic fiscal expansion yields a depreciation. As the associated expenditure switching and terms-of-trade effects are beneficial to the domestic country, households prefer flexible exchange rates. However, when the scale variable is total absorption, we obtain an appreciation and the welfare results are reversed.
Subjects: 
Fiscal Policy
New Open Economy Macroeconomics
Money Demand Specification
Flexible Exchange Rates
Monetary Union
Pricing-to-Market
JEL: 
F31
F42
F32
F41
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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