| Description |
1 online resource (52 pages). |
|
text file |
| Series |
IMF working paper ; WP/240
|
|
IMF working paper ; WP/12/240.
|
| Note |
Title from PDF title page (IMF Web site, viewed Oct. 5, 2012). |
| Summary |
This paper evaluates the role of trade and financial linkages in the decision to enter a monetary union. We estimate a two-country DSGE model for the U.K. economy and the euro area, and use the model to compute the welfare trade-offs from joining the euro. We evaluate two alternative scenarios. In the first one, we consider a reduction of trade costs that occurs after the adoption of a common currency. In the second, we introduce interest rate spread shocks of the same magnitude as the ones observed during the recent debt crisis in Europe. The reduction of trade costs generates a net welfare gain of 0.9 percent of life-time consumption, while the increased interest rate spread volatility generates a net welfare cost of 2.9 percentage points. The welfare calculation suggests two ways to preserve the welfare gains in a monetary union: ensuring fiscal and financial stability that reduces macroeconomic country risk, and increasing wage flexibility such that the economy adjusts to external shocks faster. |
| Bibliography |
Includes bibliographical references. |
| Note |
"Institute for Capacity Development." |
|
"October 2012." |
| Local Note |
eBooks on EBSCOhost EBSCO eBook Subscription Academic Collection - North America |
| Subject |
Economic and Monetary Union.
|
|
Economic and Monetary Union. |
|
Economic and Monetary Union. |
|
Monetary unions -- Europe.
|
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Monetary unions. |
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Europe. |
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Monetary unions -- Europe -- Econometric models.
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Econometric models. |
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Eurozone.
|
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Eurozone. |
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Eurozone -- Econometric models.
|
| Genre/Form |
Electronic books.
|
| Added Author |
Rabanal, Pau.
|
|
International Monetary Fund. Institute for Capacity Development.
|
| ISBN |
9781475512434 |
|
1475512430 |
| Standard No. |
10.5089/9781475512434.001 |
|
