Abstract
Abstract This paper analyzes how adoption of the euro would affect the volatility of output and inflation in the presence of asymmetric shocks. In addition, we investigate whether changes in the objective function of the ECB, or more or less active fiscal policy, can decrease losses entailed by EA membership. Overall, results indicate that a membership would decrease EA losses but increase the new member's losses significantly. However, output variability is shown largely to decrease, a fact which can be explained by the disappearance of the exchange rate. Furthermore, results indicate that automatic stabilizers and flexible inflation targeting can play an important role in reducing these losses. JEL Classification: F31, F41, G15
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
