The Stability of an Economic System comprised by a Monetary Union and a Non-member country

Research Project

Project/Area Number	26380330
Research Category	Grant-in-Aid for Scientific Research (C)
Allocation Type	Multi-year Fund
Section	一般
Research Field	Economic policy
Research Institution	Waseda University
Principal Investigator	Akiba Hiroya 早稲田大学, 政治経済学術院, 名誉教授 (60138576)
Project Period (FY)	2014-04-01 – 2017-03-31
Project Status	Completed (Fiscal Year 2016)
Budget Amount *help	¥1,950,000 (Direct Cost: ¥1,500,000、Indirect Cost: ¥450,000) Fiscal Year 2016: ¥650,000 (Direct Cost: ¥500,000、Indirect Cost: ¥150,000) Fiscal Year 2015: ¥650,000 (Direct Cost: ¥500,000、Indirect Cost: ¥150,000) Fiscal Year 2014: ¥650,000 (Direct Cost: ¥500,000、Indirect Cost: ¥150,000)
Keywords	通貨同盟 / 安定性
Outline of Final Research Achievements	With my suspicion of inheriting essentially destabilizing factor as the remote but true culprit of its crisis in an economic system comprised by a member country of the European Currency Union and a non-member, theoretical analysis was carried to support an empirical conclusion of no co-integrated relation between macro variables. My constructed open economy macro model consists of three entities (a Monetary Union, a large country, and a small country), each having their own goods and services market and money market, and operating under a floating exchange rate system with free mobility of capital internationally. The second-order non-homogeneous linear difference equation reduced from two dynamic equations for output difference and the exchange rate, it was successfully proved that the destabilizing solution was obtained. Furthermore, it was proved that there may be a case where the system exhibits stability when the UIP condition shows the forward premium puzzle.