The classic optimal currency area criterion is that countries with more correlated shocks are better candidates to form a union. We show that when countries have credibility problems this simple criterion must be changed: Symmetric countries gain credibility when joining the union only when the...

In this paper, we study optimal design of taxes and debt in the medium term in presence of domestic inequality and lack of commitment. We study an OLG economy in which individuals work and save for retirement when young. Government of the small open economy provides transfers to both the young...