This paper examines the welfare implications of a country joining a currency union as opposed to operating in a flexible exchange rate regime. At the country level, the suboptimal response to domestic and foreign shocks and the inability of setting inflation at the desired level may be offset by...

We incorporate sectoral job separation rates in a small open economy model to examine the Balassa-Samuelson (B-S) effect. Labour is mobile, but unemployment occurs due to search frictions. Moreover, unequal separation rates give rise to compensating wage differentials. We use Japanese data to...

This paper analyses elite incomes around the world, and how international comparisons of elite incomes vary depending on the exchange rate and income concept used. It is well known that between-country income inequality is higher using market exchange rates than purchasing power parity (PPP)...

This study analyzes the relationships between domestic and foreign output gaps, current-account imbalances, and real effective exchange-rate (REER) misalignments. We first set up a theoretical framework based on the elasticities and absorption approaches of the balance of payments to derive and...

The enlargement of the European monetary union to include the accession countries (ACs) will not lead to higher average inflation in the enlarged euro area, but only to inflation redistribution across countries if continuity of the monetary policy framework is preserved. In the short term,...