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Price adjustment in currency unions: another dimension to the endogeneity of the optimum currency area criteria?

Bleaney, Michael; Yin, Lin

Price adjustment in currency unions: another dimension to the endogeneity of the optimum currency area criteria? Thumbnail


Authors

Michael Bleaney

Lin Yin



Abstract

In a rational expectations model, wages and prices should respond more to shocks in currency unions than under adjustable pegs because of the absence of exchange rate adjustment. This is an aspect of the endogeneity of the optimum currency area criteria that has been largely ignored. Empirical evidence from three currency unions tends to suggest some degree of endogeneity of price flexibility, but the rate of adjustment is slow. Self-selection into currency unions by countries with naturally greater price flexibility does not appear to be a significant factor.

Journal Article Type Article
Acceptance Date Dec 20, 2017
Online Publication Date Jan 27, 2018
Publication Date Aug 31, 2018
Deposit Date Feb 14, 2018
Publicly Available Date Jan 28, 2020
Journal Oxford Bulletin of Economics and Statistics
Print ISSN 0305-9049
Electronic ISSN 1468-0084
Publisher Wiley
Peer Reviewed Peer Reviewed
Volume 80
Issue 4
Pages 788-803
DOI https://doi.org/10.1111/obes.12235
Public URL https://nottingham-repository.worktribe.com/output/906984
Publisher URL http://onlinelibrary.wiley.com/doi/10.1111/obes.12235/abstract
Additional Information This is the peer reviewed version of the following article: Bleaney, M. and Yin, L. (2018), Price Adjustment in Currency Unions: Another Dimension to the Endogeneity of the Optimum Currency Area Criteria?. Oxf Bull Econ Stat., which has been published in final form at http://dx.doi.org/10.1111/obes.12235. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving.

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