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The conduct of monetary policy in a diverse monetary union

Perotti , Enrico, (2017), “The conduct of monetary policy in a diverse monetary union”, Vox EU, 4 April

The monetary union of the euro has been established between very diverse countries. In itself, diversity is a positive feature, since variation in comparative advantages enables more risk sharing and gains from enhanced trade (Alesina and la Ferrara 2005). Yet European countries also differ in terms of institutional quality. This difference is well-appreciated by the general public and dominates the discussion in public media.1 What are the consequences of a monetary union among diverse countries?

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