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Article dans une revue American Economic Journal: Macroeconomics Année : 2014

Welfare Reversals in a Monetary Union

Résumé

We show that welfare can be lower under complete financial markets than under autarky in a monetary union with home bias, sticky prices, and asymmetric shocks. Such a monetary union is a second-best environment in which the structure of financial markets affects risk-sharing but also shapes the dynamics of inflation rates and the welfare costs from nominal rigidities. Welfare reversals arise for a variety of empirically plausible degrees of price stickiness when the Marshall-Lerner condition is met. These results carry over a model with active fiscal policies, and hold within a medium-scale model, although to a weaker extent.
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Dates et versions

halshs-00957984, version 1 (11-03-2014)

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Stéphane Auray, Aurélien Eyquem. Welfare Reversals in a Monetary Union. American Economic Journal: Macroeconomics, 2014, 6 (4), pp.246-290. ⟨10.1257/mac.6.4.246⟩. ⟨halshs-00957984⟩
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