Publication:
Instability and Trade in Currency Areas

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URI: https://hdl.handle.net/10016/3800
ISSN: 0165-1765
DOI: 10.1016/j.econlet.2006.06.044
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CORCHON_EL_2007_94_1_CL-ps.pdf (312.17 KB)
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2007
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Elsevier
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Abstract
In a currency area, when a country faces a positive shock inflation goes up, real interest rate decreases and competitiveness deteriorates. We show that the stability of equilibrium depends on the rationality of expectations and budget balance of the public sector.
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Currency areas, Trade, Real interest rate, Common monetary policy, National fiscal policies
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Economics Letters. 2007, vol. 94, nº 1, p. 71–75
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