Reference : Currency Areas and Voluntary Transfers
E-prints/Working papers : Already available on another site
Business & economic sciences : Economic systems & public economics
http://hdl.handle.net/10993/25727
Currency Areas and Voluntary Transfers
English
Picard, Pierre M mailto [University of Luxembourg > Faculty of Law, Economics and Finance (FDEF) > Center for Research in Economic Analysis (CREA) >]
Worrall, Tim [University of Edinburgh]
2015
57
No
[en] Monetary Union ; Currency Areas ; Fiscal Federalism ; Limited Commitment ; Mutual Insurance
[en] This paper discusses the relationship between the formation of a currency area and the use of voluntary fiscal transfers between countries. We show that there is a trade off between the benefits of flexible exchange rates and the additional risk sharing benefits of voluntary transfers that can be sustained in a currency area. We show that whether a currency area is beneficial or not will depend on the magnitude of economic parameter values. In particular, we show that in a simple two country model and for a plausible set of economic parameter values, a currency area is optimal.
http://hdl.handle.net/10993/25727
http://wwwen.uni.lu/content/download/83512/1026519/file/2015_12%20Currency%20%20Areas%20and%20Voluntary%20Transfers.pdf
https://ideas.repec.org/p/luc/wpaper/15-12.html

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