Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/126153
Authors: 
Groll, Dominik
Year of Publication: 
2014
Series/Report no.: 
Kiel Working Paper 1881
Abstract: 
It is conventionally held that countries are worse off by forming a monetary union when it comes to macroeconomic stabilization. However, this conventional view relies on assuming that monetary policy is conducted optimally. Relaxing the assumption of optimal monetary policy not only uncovers that countries do benefit from forming a monetary union under fairly general conditions. More importantly, it also reveals that a monetary union entails the inherent benefit of stabilizing private-sector expectations about future inflation. As a result, inflation rates are more stable in a monetary union.
Subjects: 
Monetary union
macroeconomic stabilization
welfare analysis
history dependence
inflation expectations
JEL: 
F33
F41
E52
Document Type: 
Working Paper

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