Template-Type: ReDIF-Paper 1.0
Author-Name: Paul Bergin
Author-Name-First: Paul
Author-Name-Last: Bergin
Author-Workplace-Name: Department of Economics, University of California Davis
Title: PRICE LEVEL DETERMINATION IN A HETEROGENEOUS MONETARY UNION
Abstract: A monetary union requires that a common central bank be shared among multiple nations, where governments and households may well be heterogeneous across national borders. A dynamic stochastic general equilibrium model of a two-country monetary union provides a natural setting in which to examine the implications of agent heterogeneity in government fiscal policies can be accommodated within a monetary union. Second, household heterogeneity gives monetary policy a reallocative dimension which affects price-level determination. For example, dissimilar preferences for holding money tend to enhance the potency of a monetary contraction to lower inflation. Fiscal federalism may reverse this effect.
Length: 33
File-URL: https://repec.dss.ucdavis.edu/files/HkZYdsKK2RsMJviDGkE2qWpE/97-12.pdf
File-Format: application/pdf
Number: 94
Classification-JEL: 
KeyWords: 
Creation-Date: 20030108
Handle: RePEc:cda:wpaper:94