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Journal of Economic Integration 2014 March;29(1) :188-209.
Currency Integration under Labor Mobility : when Cost is incurred

Taiyo Yoshimi 

Nanzan University, Aichi, Japan
Corresponding Author: Taiyo Yoshimi ,Tel: +81 528323111, Fax: +81 528351444, Email:
Copyright ©2014 Journal of Economic Integration
We assess whether renouncing monetary policy autonomy becomes a cost of currency integration under labor mobility in the framework of the New Open Economy Macroeconomics. Assuming Nash equilibrium among central banks of candidate countries, we find that the forfeiture of monetary policy autonomy becomes a cost when country-specific total factor productivity shocks hit them, labor input weights differ between candidate countries, and country specific shocks on marginal disutility of labor occur. These finer points suggest that it cannot generally be concluded that there is no cost of currency integration under labor mobility, as discussed in the classic Optimum Currency Area theory.

JEL Classification
F30: General
F33: International Monetary Arrangements and Institutions
F41: Open Economy Macroeconomics
Keywords: New Open Economy Macroeconomic (NOEM) Model | Currency Integration | Labor Mobility | Exchange Rate Regime
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