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Title: Monetary Integration and Economic Convergence

Author(s): Anne Sibert

Publication Date: January 1997

Keyword(s): Economic Integration, Montetary Union and Policy Coordination

Programme Area(s): International Macroeconomics

Abstract: Recent research in contract theory views ownership as a substitute for complete contracts. In this paper this approach is applied to monetary integration. Countries face a coordination problem when conducting monetary policy: negative spillovers ensure uncoordinated policy generates too high inflation. Ex ante, policy-makers can undertake politically costly economic reform. This has a positive spillover because it improves the outcome of the monetary policy game. Ex post, contracting over policy may be possible, however, it is supposed that ex-ante contracting over reform and monetary policy, is not. This paper analyses when monetary union is a good substitute for this inability to commit.

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Bibliographic Reference

Sibert, A. 1997. 'Monetary Integration and Economic Convergence'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=1561