Economics 15/06: Price Adjustment in Currency Unions

Abstract

In a rational expectations model, wages and prices should respond more to shocks in currency unions than in soft pegs because of the absence of exchange rate adjustment. Empirical evidence from three currency unions tends to support this hypothesis, but the rate of adjustment is slow.

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School Discussion Paper 2015-06, December 2015

Authors

Michael Bleaney and Lin Yin

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