This paper takes a first step in analysing how a monetary union performs in the presence of labour market asymmetries. Differences in wage flexibility, market power and country sizes are allowed for in a setting with both country-specific and...

Financial markets in Euroland differ from those of a national monetary union in two regards. First, capital markets in general and banking markets in particular show a greater degree of segmentation than national financial markets as a result of...

This paper uses a dynamic general equilibrium two-country optimizing sticky-price model to analyze the consequences of international financial market integration for the propagation of asymmetric productivity shocks in a monetary union. The model...

This paper discusses whether the integration of international financial markets affects business cycle fluctuations. In the framework of a new open economy macro-model, we show that the link between financial openness and business cycle volatility...

The desirability of flexible exchange rates is a central tenet in international macroeconomics. We show that, with forward-looking staggered pricing, this result crucially depends on the monetary authority's ability to commit. Under full commitment,...

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...

It is conventionally held that countries are worse off by forming a monetary union when it comes to macroeconomic stabilization. However, this conventional view relies on assuming that monetary policy is conducted optimally. Relaxing the assumption...

The desirability of flexible exchange rates is a central tenet in international macroeconomics. We show that, with forward-looking staggered pricing, this result crucially depends on the monetary authority's ability to commit. Under full commitment,...