IMF paper considers monetary union risks


A working paper published today (October 3), by the International Monetary Fund (IMF), says financial turbulence can eclipse the welfare gains a country experiences after joining a monetary union.

The authors, Ruy Lama and Pau Rabanal, say a country joining a union can benefit from lower transaction costs when trading with other members, which leads to higher consumption and welfare.

However, the financial channel in the union can undermine this benefit. "The welfare costs from an episode of

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