United in Diversity: A HANK2 model of currency areas
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Series
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Speaker(s)Gernot Müller (Univeristy of Tuebingen, Germany)
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FieldFinance, Macroeconomics
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LocationErasmus University Rotterdam, Campus Woudestein, Polak 2-09
Rotterdam -
Date and time
November 28, 2022
11:30 - 12:30
Abstract
The heterogeneity of currency areas is much discussed ever since Mundell (1961). Traditionally, the focus is on heterogeneity at the macro level and the welfare costs and benefits of a common currency are assessed in terms of countries. In this paper, we
account for heterogeneity at the household level as we put forward a heterogeneous
agent New Keynesian model of two countries: HANK2. We calibrate the model to the euro area and study the transmission of country-specific shocks. The adjustment dynamics to such shocks differ across countries. Their welfare implications, however,
differ not so much across countries but across households along the wealth
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