An Economic Analysis of Monetary Union

This book explores the new economics of monetary UnIon. It carefully discusses the effects of shocks and policies on output and prices. Shocks and policies are country-specific or common. They occur on the demand or supply side. Countries can differ in behavioural functions. Wages can be fixed, flexible, or slow. In addition, fixed wages and flexible wages can coexist. Take for instance fixed wages in Germany and flexible wages in France. Or take fixed wages in Europe and flexible wages in America. A special feature of this book is the numerical estimation of shock and policy multipliers. Further topics are inflation and disinflation. Take for instance inflation in Germany and price stability in France. Then what policy is needed for disinflation in the union? And what will be the dynamic effects on Germany and France? The present book is part of a larger research project on monetary union, see Carlberg (1999, 2000). Over the years, in working on this project, I have benefited from comments by lain Begg, Christopher Bliss, Michael Cyrus, Johannes Hackmann, Bemd Hayo, Jay H. Levin, Jochen Michaelis, Franco Reither, Gerhard Rübel, Wolf Schäfer, Michael Schmid, and Artur Woll. In addition, Michael Bräuninger and Alkis Otto carefully discussed with me all parts of the manuscript. Last but not least, Doris Ehrich did the secretarial work as excellently as ever. I would like to thank all of them. March 2001 Michael Carlberg Executive Summary 1) The small monetary union as a whole. First consider monetary policy.

Monetary Unions, like EURO-Zone are analysied and policy recommendations are given

Contenu
One. The Small Union as a Whole.- 1. Fixed Money Wages.- 1. The Model.- 2. Monetary Policy.- 3. Fiscal Policy.- 4. Wage Shocks.- 5. Productivity Shocks.- 6. Summary.- 2. Flexible Money Wages.- 1. The Model.- 2. Monetary Policy.- 3. Fiscal Policy.- 4. Labour Supply Shocks.- 5. Productivity Shocks.- 6. Summary.- 3. Slow Money Wages.- 1. Producer Price Inflation.- 1.1. The Model.- 1.2. Some Shocks.- 1.3. Extensions.- 2. Consumer Price Inflation.- 2.1. The Model.- 2.2. Monetary Shocks.- 3. Summary.- Two. The Small Union of Two Countries.- 1. Fixed Money Wages.- 1. The Model.- 2. Monetary Policy.- 3. Fiscal Policy.- 4. Wage Shocks.- 5. Productivity Shocks.- 6. Summary.- 2. Flexible Money Wages.- 1. The Model.- 2. Monetary Policy.- 3. Fiscal Policy.- 4. Labour Supply Shocks.- 5. Productivity Shocks.- 6. Summary.- 3. Fixed Money Wages in Germany, Flexible Money Wages in France.- 1. The Model.- 2. Monetary Policy in the Union.- 3. Fiscal Policy in Germany.- 4. Fiscal Policy in France.- 5. Wage Shocks in Germany.- 6. Labour Supply Shocks in France.- 7. Summary.- 4. Slow Money Wages.- 1. The Model.- 2. Some Shocks.- 3. Required Monetary Policy.- 4. Downwards Sticky Wages.- 5. Summary.- 5. Different Behavioural Functions.- 1. Fixed Money Wages.- 1.1. The Model.- 1.2. Different Income Sensitivities of Money Demand.- 1.3. Different Consumption Rates.- 1.4. Different Degrees of Openness.- 1.5. Summary.- 2. Flexible Money Wages.- 2.1. The Model.- 2.2. Different Income Sensitivities of Money Demand.- 2.3. Different Consumption Rates.- 2.4. Different Degrees of Openness.- 2.5. Summary.- Three. The World as a Whole.- 1. Fixed Money Wages.- 1. The Model.- 2. Investment Shocks.- 3. Monetary Policy.- 4. Wage Shocks.- 5. Productivity Shocks.- 6. Summary.- 2. Flexible Money Wages.- 1. The Model.- 2. Monetary Policy.- 3. Investment Shocks.- 4. Labour Supply Shocks.- 5. Productivity Shocks.- 6. Summary.- Four. The World of Two Regions.- 1. Fixed Money Wages.- 1. The Model.- 2. Monetary Policy.- 3. Investment Shocks.- 4. Wage Shocks.- 5. Productivity Shocks.- 6. Summary.- 2. Flexible Money Wages.- 1. The Model.- 2. Monetary Policy.- 3. Investment Shocks.- 4. Labour Supply Shocks.- 5. Productivity Shocks.- 6. Summary.- 3. Fixed Money Wages in Europe, Flexible Money Wages in America.- 1. The Model.- 2. Monetary Policy in Europe.- 3. Monetary Policy in America.- 4. Investment Shocks in Europe.- 5. Investment Shocks in America.- 6. Wage Shocks in Europe.- 7. Labour Supply Shocks in America.- 8. Summary.- Conclusion.- 1. The Small Union as a Whole.- 1.1. Fixed Money Wages.- 1.2. Flexible Money Wages.- 1.3. Slow Money Wages.- 2. The Small Union of Two Countries.- 2.1. Fixed Money Wages.- 2.2. Flexible Money Wages.- 2.3. Fixed Money Wages in Germany, Flexible Money Wages in France.- 2.4. Slow Money Wages.- 2.5. Different Behavioural Functions.- 3. The World as a Whole.- 3.1. Fixed Money Wages.- 3.2. Flexible Money Wages.- 4. The World of Two Regions.- 4.1. Fixed Money Wages.- 4.2. Flexible Money Wages.- 4.3. Fixed Money Wages in Europe, Flexible Money Wages in America.- Result.- 1. The Small Union as a Whole.- 1.1. Fixed Money Wages.- 1.2. Flexible Money Wages.- 2. The Small Union of Two Countries.- 2.1. Fixed Money Wages.- 2.2. Flexible Money Wages.- 3. The World of Two Regions.- 3.1. Fixed Money Wages.- 3.2. Flexible Money Wages.- Symbols.- Brief Survey of the Literature.- References.