Groll, Dominik; Monacelli, Tommaso - 2016
The desirability of flexible exchange rates is a central tenet in international macroeconomics. We show that, with … 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 …