American Economic Review Vol. 82 No. 4 1992
Participation in a Currency Union
Abstract
In any voluntary cooperative agreement, the potential gain from deviation should determine the minimum influence required over common decision-making. This paper begins by observing that a highly asymmetrical distribution of power between two partners is not sustainable if the choice variables are strategic substitutes. It then studies a simple general-equilibrium model of a monetary union and shows that a small economy will not take part in the agreement unless it can secure influence that is more than proportional to its size and a transfer of seigniorage revenues in its favor.
- Volume
- 82
- Issue
- 4
- Pages
- 847-863
- Sources
- bibtex:phds-export.bib