A Simple Model of a Currency Union with Endogenous Money and Saving-Investment Imbalances
Berlin School of Economics and Law Working Paper No. 16/2012
29 Pages Posted: 12 Dec 2013
Date Written: December 1, 2012
The economic crisis in the euro zone proves that neither the creators of the euro nor today's policy-makers fully understand the functioning of a currency union. Explanations of the macroeconomic relations inside a currency union are therefore in demand. It is now clear that macroeconomic imbalances and debt levels should be part of a model. Traditional textbook models, like the IS-LM-BP or the IS-MR-PC models, respectively, are found lacking on the monetary or the real side or both. The one developed in the following has been created with the purpose of filling this gap and allowing the macroeconomic analysis of a currency union with the help of a simple model featuring endogenous money and saving-investment imbalances.
Keywords: endogenous money, saving-investment imbalances, EMU
JEL Classification: E12, F41
Suggested Citation: Suggested Citation