We explore endogenous monetary unification in the context of a model in which a country with serious structural distortions (and, hence, high inflation) is admitted into a monetary union once its economic structure has converged sufficiently towards that of the existing participants. If...

We explore endogenous monetary unification in the context of a model in which a country with serious structural distortions (and, hence, high inflation) is admitted into a monetary union once its economic structure has converged sufficiently towards that of the existing participants. If...

Within a standard model of monetary delegation we show thta the optimal linear inflation contract performs strictly better than the optimal inflation target when there is uncertainty about the central banker's preferences. The optimal combination of a contract and a target performs best and...