The Korean Journal of Economic Studies
Currency Unification and Real-Value Anchored Unit of Account
Bia Kim (Korea University) and Manjong Lee (Korea University)Year 2015Vol. 63No. 3
Abstract
In the interim stage of currency unification, an exchange rate uncertaintywould be unavoidable. Against this uncertainty, real-value anchoredunit-of-account (RUoA) is studied in a standard monetary general equilibriummodel. Particularly, the model is asked to suggest the conditions under whichRUoA can improve welfare. Our results imply that RUoA can indeed enhancewelfare if the volatility of exchange rate and the frequency of inter-countrytransactions are high enough. Otherwise, however, it turns out that RUoAdeteriorates the welfare mainly due to its maintenance cost.