Monetary Policy and National Labor Market Asymmetries in a Currency Union

Christian Proaño
Written By SCEPA

WORKING PAPER

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This paper investigates the design of optimal monetary policy in a currency union with asymmetric national labor markets.

Through numerical simulations it is shown that a larger weight of the country with the more sclerotic labor market in the loss function of the monetary union's central bank is more advantageous at the monetary union's level than a simple weighting scheme based on the relative economic size of both countries.

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