Monetary policy as an optimum currency area criterion

Whether countries benefit from forming a monetary union depends critically on the way monetary policy is conducted. This is mainly because monetary policy determines whether and to what extent a flexible nominal exchange rate fosters or hampers macroeconomic stabilization, even if monetary policy does not target the nominal exchange rate explicitly

When do Countries Benefit from Forming a Monetary Union?

The New Keynesian DSGE literature has come to the consensus that, from the perspective of business cycle stabilization, countries are worse off in terms of welfare by forming a monetary union. This consensus, however, is based on the assumption of monetary policy being optimal. Using a standard two-country model, this paper shows that under suboptimal monetary policy, countries may gain in welfare by forming a monetary union, highlighting an important inherent benefit of fixing the exchange rate. Whether countries benefit from a monetary union depends primarily on the degree of price stickiness and how monetary policy is conducted: If prices are rather sticky and if monetary policy is not very aggressive towards inflation, forming a monetary union is beneficial. In contrast, asymmetries in the degree of price stickiness between countries are not of any importance for a monetary union to be welfare-enhancing or not

The inherent benefit of monetary unions

The desirability of flexible exchange rates is a central tenet in international macroeconomics. We show that, with forward-looking staggered pricing, this result crucially depends on the monetary authority's ability to commit. Under full commitment, flexible exchange rates generally dominate a monetary union (or fixed exchange rate) regime. Under discretion, this result is overturned: a monetary union dominates flexible exchange rates. By fixing the nominal exchange rate, a benevolent monetary authority finds it welfare improving to trade off flexibility in the adjustment of the terms of trade in order to improve on its ability to manage the private sector's expectations. Thus, inertia in the terms of trade (induced by a fixed exchange rate) is a cost under commitment, whereas it is a benefit under discretion, for it acts like a commitment device

The Inherent Benefit of Monetary Unions

The desirability of flexible exchange rates is a central tenet in international macroeconomics. We show that, with forward-looking staggered pricing, this result crucially depends on the monetary authority's ability to commit. Under full commitment, flexible exchange rates generally dominate a monetary union (or fixed exchange rate) regime. Under discretion, this result is overturned: a monetary union dominates flexible exchange rates. By fixing the nominal exchange rate, a benevolent monetary authority finds it welfare improving to tradeoff efficiency in the adjustment of the terms of trade in order to improve on its ability to manage private sector's expectations. Thus, fixed exchange rate-induced inertia in the terms of trade is a cost under commitment, whereas it is a benefit under discretion, for it acts like a commitment device

E/E-product data management in consideration of model-based systems engineering

This paper presents objectives for permeable electric/electronics product data management for mechatronic products in consideration of model-based systems engineering from the early product development phase till a lifecycle management. Idiosyncrasies of mechatronic products, requirements engineering, model-based systems engineering, artifact-orientation, and interconnections of artifacts are evaluated and postulate objectives, how artifacts have to be designed in order to support the linkage of model-based systems engineering and product data management (PDM). The objectives, derived from the different theories and requirements to foster permeable PDM, are: i) Identify all existing norms for the development of mechanical, electronic, and software aspects and elaborate how information artifacts have to be defined. ii) (Textual) Requirements have to be technically feasible to be linked to information artifacts and system models already in the early development phase. iii) System models have to be aligned to information artifacts from the models' creation onwards and standardization in exchange formats has to be ensured. iv) Information artifacts with own lifecycles shall alleviate PDM in the early product development phase. v) Interconnections shall ameliorate associativity through capturing process information between single artifacts. A first concept is presented, visualizing the aforementioned objectives and their contribution in the early development process of mechatronic products, how a permeable PDM might be achieved

Monetary union and macroeconomic stabilization

It is conventionally held that countries are worse off by forming a monetary union when it comes to macroeconomic stabilization. However, this conventional view relies on assuming that monetary policy is conducted optimally. Relaxing the assumption of optimal monetary policy not only uncovers that countries do benefit from forming a monetary union under fairly general conditions. More importantly, it also reveals that a monetary union entails the inherent benefit of stabilizing private-sector expectations about future inflation. As a result, inflation rates are more stable in a monetary union

Essays on Labor Market Responses to the Great Recession and on the Effects of Monetary Unification on Macroeconomic Stability

This dissertation consists of two parts. Part I deals with labor market responses to the Great Recession. It examines whether labor market institutions, such as short-time work, can explain the heterogeneous labor market responses across Europe and it lays out the main reasons for the so-called German labor market miracle. Part II deals with the effects of monetary unification on macroeconomic stability. It describes an inherent benefit of monetary unification that has the potential to overcompensate the loss of monetary independence and it focuses on the important role of monetary policy for whether countries benefit from monetary unification in terms of macroeconomic stability