06946oam 22015614 450 991081461610332120200520144314.01-4755-1226-01-4755-1225-2(CKB)2670000000278842(EBL)1607014(SSID)ssj0000949355(PQKBManifestationID)11596461(PQKBTitleCode)TC0000949355(PQKBWorkID)10998149(PQKB)10242565(Au-PeEL)EBL1607014(CaPaEBR)ebr10627063(OCoLC)870245071(IMF)WPIEE2012240(IMF)WPIEA2012240(MiAaPQ)EBC1607014(EXLCZ)99267000000027884220020129d2012 uf 0engur|n|---|||||txtccrDeciding to Enter a Monetary Union : TheRole of Trade and Financial Linkages /Ruy Lama, Pau Rabanal1st ed.Washington, D.C. :International Monetary Fund,2012.1 online resource (53 p.)IMF Working PapersDescription based upon print version of record.1-4755-1243-0 1-4755-1143-4 Includes bibliographical references.Cover; Contents; 1. Introduction; 2. The Model; 2.1 Households, International Assets Markets, and Staggered Wage Setting; 2.2 Firms; 2.3 Closing the Model; 3. Bayesian Estimation; 3.1 Data; 3.2 Model Dynamics and Data Transformations; 3.3 Estimation: Priors and Posteriors; Tables; Table 1 Calibrated Parameters; Table 2 Prior Distributions; Table 3 Posterior Distributions, structural parameters; Table 4 Posterior Distributions, shocks parameters; 4. Policy Analysis: Welfare Gains of Entering a Monetary Union; Table 5 Second Moments; Table 6 Steady State Effects and Welfare GainsTable 7 Business Cycle Effects and Welfare Gains5. Sensitivity Analysis; 6. Conclusions; Technical Appendix; References; Figures; Figure 1 Monetary Policy Rates in United Kingdom and the Euro Area: 1999-2011; Figure 2 Trade with Euro Area in France, Germany, Italy, Spain and the United Kingdom; Figure 3 Risk Premium in France, Italy, Spain the United Kingdom; Figure 4 Impulse Response Functions to 25 basis points increase in UIP Shock; Figure 5 Sensitivity Analysis of WelfareThis paper evaluates the role of trade and financial linkages in the decision to enter a monetary union. We estimate a two-country DSGE model for the U.K. economy and the euro area, and use the model to compute the welfare trade-offs from joining the euro. We evaluate two alternative scenarios. In the first one, we consider a reduction of trade costs that occurs after the adoption of a common currency. In the second, we introduce interest rate spread shocks of the same magnitude as the ones observed during the recent debt crisis in Europe. The reduction of trade costs generates a net welfare gain of 0.9 percent of life-time consumption, while the increased interest rate spread volatility generates a net welfare cost of 2.9 percentage points. The welfare calculation suggests two ways to preserve the welfare gains in a monetary union: ensuring fiscal and financial stability that reduces macroeconomic country risk, and increasing wage flexibility such that the economy adjusts to external shocks faster.IMF Working Papers; Working Paper ;No. 2012/240Monetary unionsInternational tradeBanks and BankingimfConsumptionimfCurrenciesimfCurrencyimfEconomic & financial crises & disastersimfEconomic integrationimfEconomicsimfExports and ImportsimfFinanceimfFinancial Aspects of Economic IntegrationimfFinancial CrisesimfFinancial crisesimfFinancial Risk ManagementimfFinancial servicesimfForeign ExchangeimfForeign exchangeimfGovernment and the Monetary SystemimfInterest rate parityimfInterest ratesimfInterest Rates: Determination, Term Structure, and EffectsimfInternational Business CyclesimfInternational economicsimfInternational Policy Coordination and TransmissionimfMacroeconomicsimfMacroeconomics: ConsumptionimfMonetary economicsimfMonetary PolicyimfMonetary SystemsimfMonetary unionsimfMoney and Monetary PolicyimfMoneyimfNational accountsimfOpen Economy MacroeconomicsimfPayment SystemsimfReal exchange ratesimfRegimesimfSavingimfStandardsimfWealthimfUnited KingdomimfMonetary unions.International trade.Banks and BankingConsumptionCurrenciesCurrencyEconomic & financial crises & disastersEconomic integrationEconomicsExports and ImportsFinanceFinancial Aspects of Economic IntegrationFinancial CrisesFinancial crisesFinancial Risk ManagementFinancial servicesForeign ExchangeForeign exchangeGovernment and the Monetary SystemInterest rate parityInterest ratesInterest Rates: Determination, Term Structure, and EffectsInternational Business CyclesInternational economicsInternational Policy Coordination and TransmissionMacroeconomicsMacroeconomics: ConsumptionMonetary economicsMonetary PolicyMonetary SystemsMonetary unionsMoney and Monetary PolicyMoneyNational accountsOpen Economy MacroeconomicsPayment SystemsReal exchange ratesRegimesSavingStandardsWealth332.152Lama Ruy1769292Rabanal Pau1627816DcWaIMFBOOK9910814616103321Deciding to Enter a Monetary Union4241653UNINA