Abstract
In light of the increase in regional monetary unions, this paper examines the importance of currency union using a modified Barro-Gordon model. The model assumes that monetary unions follow a rule-base while individual central banks follow discretionary monetary policy rule. We find that monetary union serves as a disciplinary mechanism and enhances commitment for member countries. Our results also strengthen other findings that monetary unions can lower inflation and government spending.
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Article Details
- Year: 2011
- Volume: 32
- Issue: 4
- Pages: 1 - 20
- Accepted: 13.01.2012
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DOI:
https://doi.org/10.5281/zenodo.21157517 -
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How to Cite?
Tamsir Cham (2011). Why Join a Monetary Union? Theoretical Answers for Policy Makers in the West African Monetary Zone (WAMZ). Journal of Economic Cooperation and Development, 32(4), 1-20. https://doi.org/10.5281/zenodo.21157517
