In this blog, I will show how to build a model of the fragility of an incomplete monetary union. The idea is to find the optimal inflation rule and to examine different configurations for fixed exchange rate and expectation of a devaluation.
To this end, I will use Mathematica and the chapter 5 of this book (https://global.oup.com/ushe/product/economics-of-the-monetary-union-9780198849544), that I use in my lectures on Economics of Monetary Union. Allow me to explain the different steps in the notebook below. I would like to publicly thank Paul De Grauwe for providing his very clear lecture notes.
Economics of the Monetary Union, Thirteenth Edition, 2020, ISBN: 9780198849544, 304 pages, https://global.oup.com/ushe/product/economics-of-the-monetary-union-9780198849544