Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/307024 
Year of Publication: 
2020
Citation: 
[Journal:] Journal of Monetary Economics [ISSN:] 1873-1295 [Volume:] 111 [Publisher:] Elsevier [Place:] Amsterdam [Year:] 2020 [Pages:] 63-79
Publisher: 
Elsevier, Amsterdam
Abstract: 
If the monetary authority lacks commitment, a monetary union can dominate flexible exchange rates. With forward-looking staggered pricing, inertia in the terms of trade—induced by a fixed exchange rate—is a benefit under discretion, since it acts like a commitment device. By trading off flexibility in the adjustment of the terms of trade, the monetary authority improves on its ability to manage private sector’s expectations. The higher the incidence of asymmetric inefficient shocks, and/or the higher the degree of nominal price rigidity, the greater the inherent benefit of monetary unions, in stark contrast to the traditional optimum currency area theory.
Published Version’s DOI: 
Creative Commons License: 
cc-by-nc-nd Logo
Document Type: 
Article
Document Version: 
Accepted Manuscript (Postprint)

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.