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A General Framework For The Macroeconomic Analysis Of Monetary Unions

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Abstract

The objective of this paper is to develop a general framework for the macroeconomic modelling of monetary unions, which could be useful for policy analysis, as well as for teaching purposes. Our starting point will be the standard twocountry Mundell-Fleming model with perfect capital mobility, extended to incorporate the supply side, and modified so that the money market is common for two countries forming a monetary union. The model is presented in two versions: for a small and a big monetary union, respectively. After solving each model, we will derive multipliers for monetary, real (i. e., demand-side), supply, and external shocks, paying a special attention to the distinction between symmetric and asymmetric shocks. A graphical analysis is also provided.

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  • Óscar Bajo Rubio & Carmen Díaz Roldán, 2001. "A General Framework For The Macroeconomic Analysis Of Monetary Unions," Documentos de Trabajo - Lan Gaiak Departamento de Economía - Universidad Pública de Navarra 0101, Departamento de Economía - Universidad Pública de Navarra.
    • Handle: RePEc:nav:ecupna:0101
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    1. Läufer, Nikolaus K. A. & Sundararajan, Srinivasa, 1994. "The international transmission of economic shocks in a three-country world under mixed exchange rates," Discussion Papers, Series II 216, University of Konstanz, Collaborative Research Centre (SFB) 178 "Internationalization of the Economy".
    2. Layard, Richard & Nickell, Stephen & Jackman, Richard, 2005. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, number 9780199279173.
    3. Carlin, Wendy & Soskice, David, 1990. "Macroeconomics and the Wage Bargain: A Modern Approach to Employment, Inflation, and the Exchange Rate," OUP Catalogue, Oxford University Press, number 9780198772446.
    4. John F. O. Bilson & Richard C. Marston, 1984. "Exchange Rate Theory and Practice," NBER Books, National Bureau of Economic Research, Inc, number bils84-1, February.
    5. Maurice Obstfeld & Kenneth Rogoff, 1995. "The Mirage of Fixed Exchange Rates," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 73-96, Fall.
    6. Richard C. Marston, 1984. "Exchange Rate Unions as an Alternative to Flexible Rates: The Effects of Real and Monetary Disturbances," NBER Chapters, in: Exchange Rate Theory and Practice, pages 407-442, National Bureau of Economic Research, Inc.
    7. Laufer, Nikolaus K. A. & Sundararajan, Srinivasa, 1994. "The international transmission of economic shocks in a three-country world under mixed exchange rates," Journal of International Money and Finance, Elsevier, vol. 13(4), pages 429-446, August.
    8. Jeffrey Sachs, 1980. "Wages, Flexible Exchange Rates, and Macroeconomic Policy," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 94(4), pages 731-747.
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    2. NI PUTU WIWIN SETYARI & Tri WIDODO & M. EDHIE PURNAWAN, 2016. "Labour Force Effects To Current Account Movement Of Asean + 6 Countries," Review of Economic and Business Studies, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, issue 18, pages 183-209, December.

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