Feasibility, Desirability and Stability of Currency Unions
2015/02/10
研討會日期 : 2015-02-10
時間 : 14:30
主講人 : Ms. Chih-yi Chen
主持人 : Professor Pei-Ju Liao
地點 : Conference Room B110
演講者簡介 : Ms. Chen will receive her Ph.D. in Economics from University of Wisconsin-Madison in 2015. Her research fields are Macroeconomics, Monetary Economics, Search Theory, and Asset Pricing.
演講摘要 : This paper provides a two-country, one-currency search-theoretic model to explore the feasibility, desirability and stability of forming a common currency area. The value of money to agents of each country depends on the overall level of economic activity in that country, and a currency union is feasible if and only if the agents from the participating countries do not value the currency too differently. This requires that the countries cannot be too different in their productivity and/or population. The paper shows that each country has a unique need for liquidity, and giving up control of its national money supply is costly. Hence, countries desire a currency union only if they have similar demands for money, and/or if they can potentially gain a high volume of international trade in a union. Therefore, a currency union is more likely to be formed if the country with relatively low productivity is small in population. Finally, it is shown that a higher inflation (deflation) rate can expand (shrink) the region of parameter space where a currency union is viable in the case where one country is significantly more productive than the other, and thus the sustainability of an existing currency union can be jeopardized if the monetary authority does not choose an inflation target wisely.
