Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/189459 
Authors: 
Year of Publication: 
1997
Series/Report no.: 
Working Paper No. 97-12
Publisher: 
University of California, Department of Economics, Davis, CA
Abstract: 
A monetary union requires that a common central bank be shared among multiple nations, where governments and households may well be heterogeneous across national borders. A dynamic stochastic general equilibrium model of a two-country monetary union provides a natural setting in which to examine the implications of agent heterogeneity in government fiscal policies can be accommodated within a monetary union. Second, household heterogeneity gives monetary policy a reallocative dimension which affects price-level determination. For example, dissimilar preferences for holding money tend to enhance the potency of a monetary contraction to lower inflation. Fiscal federalism may reverse this effect.
Document Type: 
Working Paper

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