Inflation, Debt, and Default in a Monetary Union
Electronic Access:
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Summary:
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.
Series:
Working Paper No. 2000/179
Subject:
Banking Bonds Debt service Economic integration External debt Financial institutions Inflation Monetary unions Price stabilization Prices
English
Publication Date:
November 1, 2000
ISBN/ISSN:
9781451859027/1018-5941
Stock No:
WPIEA1792000
Pages:
30
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