Working Paper
Monetary Policy as an Optimum Currency Area Criterion
Whether countries benefit from forming a monetary union depends critically on the way monetary policy is conducted. This is mainly because monetary policy determines whether and to what extent a flexible nominal exchange rate fosters or hampers macroeconomic stabilization, even if monetary policy does not target the nominal exchange rate explicitly.
Key Words
- macroeconomic stabilization
- Monetary union
- optimum currency area theory
- trade openness
- welfare analysis