One size must fit All: national divergences in a monetary union

摘要

Should a common central bank in a heterogeneous monetary union base its decisions on EU-wide averages of economic variables or on national welfare losses? A central bank that minimizes the sum of national welfare losses reacts less to common shocks. Under certain parameters constellations this leads to higher average union-wide expected welfare and it might thus be preferable that decision- making is dominated by national representatives. Countries with a transmission mechanism far from the average benefit from an orientation on national welfare losses. For countries with a transmission mechanism close to the average, welfare can be lower in this case.