Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/277085 
Year of Publication: 
2006
Citation: 
[Journal:] Intervention. Zeitschrift fuer Ökonomie / Journal of Economics [ISSN:] 2195-3376 [Volume:] 03 [Issue:] 2 [Year:] 2006 [Pages:] 351-369
Publisher: 
Metropolis-Verlag, Marburg
Abstract: 
This paper examines the implications of a currency union for monetary policy. The formation of a currency union worsens the inflation-unemployment tradeoff, so that leaving the inflation target unchanged at its pre-currency union level generates increased unemployment. Geographically based fiscal automatic stabilizers can improve the inflation-unemployment trade-off, which has bearings on the Euro area's Stability and Growth Pact. Financial intermediary balance sheet regulation based on asset-based reserve requirements (ABRR) can provide additional country-specific policy instruments. ABRR alleviate the targets and instruments problem afflicting the monetary authority in a currency union context. This is important for the European Central Bank, which is trying to manage divergent country growth rates with a single interest rate instrument.
Subjects: 
currency unions
Phillips curve
monetary policy
fiscal policy
asset based reserve requirements
JEL: 
E5
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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