Effects of Monetary Unions on Inequalities

Effects of Monetary Unions on Inequalities

Title : Effects of Monetary Unions on Inequalities
Number : 10/14
Author(s) : Timur Hülagü, Devrim İkizler
Language : English
Date : August 2010
Abstract : This paper analyzes how forming a monetary union affects consumption and earnings inequalities caused by adopting a common currency. We use a two country overlapping-generations model to investigate these effects. When countries choose to form a monetary union, the country with higher initial inflation will definitely experience an increase in its inequalities. In the country with lower initial inflation, however, inequalities might go in either direction since the inflationary effect of uniting its monetary policy with a high inflation country can dominate the reducing effect of vanished trade frictions on inflation.
Keywords : Monetary Unions, Inflation, Inequality, Heterogeneity.
JEL Codes : D31, E21, E24, E31, E50

Effects of Monetary Unions on Inequalities
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