This paper evaluates the welfare gains arising from a deeper trade integration in the European Monetary Union. To do this, the European Monetary Union is represented in a realistic way by an intertemporal general equilibrium model with incomplete financial markets, sticky prices and home bias...

This paper explores the implications of the European single currency within a simple sticky price intertemporal model. The main issue we focus on is how the euro may alter the responsiveness of consumer prices to exchange rate changes. Our central conjectures is that the acceptance of the euro...

When monetary policy is constrained by the zero lower bound, fiscal policy can be used to achieve macro stabilization objectives. At the same time, fiscal policy is also a key policy variable within a single currency area that allow policy makers to respond to regional demand asymmetries. How do...