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Optimal monetary policy in the monetary union: effects on business cycles
Author(s) -
Pedram Mehdi
Publication year - 2011
Publication title -
opec energy review
Language(s) - English
Resource type - Journals
eISSN - 1753-0237
pISSN - 1753-0229
DOI - 10.1111/j.1753-0237.2010.00183.x
Subject(s) - monetary policy , economics , business cycle , inflation (cosmology) , monetary economics , monetary hegemony , macro , inflation targeting , macroeconomics , credit channel , simple (philosophy) , keynesian economics , computer science , physics , theoretical physics , programming language , philosophy , epistemology
The difficulties of a common monetary policy in an economic and monetary union are well known where there are differences between the stage of the business cycles and inflation pressures. In this paper, I will show that in a simple open macro model and by using ‘weighted mean mechanism’ monetary authorities can employ a common monetary policy to synchronise diverging business cycles in the member states.