Discussion Paper Details

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Title: Structural Convergence Under Reversible and Irreversible Monetary Unification

Author(s): Roel Beetsma and Henrik Jensen

Publication Date: March 1999

Keyword(s): Convergence, Inflation, Monetary Unification and structural distortions

Programme Area(s): International Macroeconomics

Abstract: We explore endogenous monetary unification in the context of a model in which a country with serious structural distortions (and, hence, high inflation) is admitted into a monetary union once its economic structure has converged sufficiently towards that of the existing participants. If unification is reversible, so that the new entrant can always be forced to leave the union again later, convergence stops for a while after the high inflation country has joined. With irreversible unification, temporary divergence occurs, and unification is most likely to be delayed.

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Bibliographic Reference

Beetsma, R and Jensen, H. 1999. 'Structural Convergence Under Reversible and Irreversible Monetary Unification'. London, Centre for Economic Policy Research.