Inflation, Debt, and Default in a Monetary Union

Depending on the preferences of the central bank, countries in a monetary union tend to accumulate less debt. This reduces the need for fiscal criteria such as debt ceilings. In a monetary union with an independent central bank and a sufficiently large number of relatively small members, investors will begin rationing credit to the government more rapidly, and an equilibrium with no inflation and no default exists. However, highly-indebted countries are more likely to default once they join a monetary union.
Publication date: November 2000
ISBN: 9781451859027
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This title contains information about the following subjects. Click on a subject if you would like to see other titles with the same subjects.

International - Economics , International - Economics , Public debt , monetary policy , monetary union , default , central bank

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