The customs union argument for a monetary union

Monetary Union Its Costs

A Simulation Experiment of a Customs Union

Here a numerical simulation model, implemented in Excel, that can be used to expand student understanding of the theory of customs unions is presented. The model allows examination of core customs union issues including trade creation, trade diversion, and the Kemp–Wan theorem. By responding to an experimental assignment that guides them through the simulation, students are able to learn the th...

monetary :union: its costs

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Challenges for Monetary Policy in the European Monetary Union

The financial crisis has brought the “monetary policy consensus” formed in the years prior to the crisis under scrutiny (Bean et al., 2010). The framework of monetary policy differed significantly from one central bank to another. Never theless, across the board their primary objective was price stability—defined as a stabilization of the inflation rate at around 2 percent across a horizon of a...

Monetary Union and Fiscal Federalism

Does a monetary union need fiscal shock absorbers helping the participating countries to cope with asymmetric shocks? The consensus in the debate over EMU argues that the answer is yes. In this paper, we revisit the issue, building on a dynamic, general equilibrium framework of regions in a monetary union exposed to asymmetric shocks. We show that inter-regional taxes and transfers can stabiliz...