Three essays on the regional economics of monetary union

The first essay, "Money and Regional Price Dispersion in the U.S.," explores the possibility that a common, or aggregate, monetary policy may have different effects on the member region/countries in a monetary union. This has interesting policy implications, two of which are that monetary shocks are bad because they cause inefficient flows of goods and workers between the differentially affected regions, and that aggregate monetary policy may itself create asymmetric regional shocks within the monetary union.;The second essay, "Industrial Localization: A Test of the Marshall/Krugman Hypothesis," investigates empirically the Marshall/Krugman hypothesis, which implies that workers and firms concentrate in order to increase the possibilities for risk pooling and to take advantage of non-traded inputs. If industrial concentration arises for these reasons, then asymmetric shocks to industries within a city should be more correlated than asymmetric shocks to the same industry in different cities. This implication is tested using employment data for four cities in the U.S., and the results fail to reject the Marshall/Krugman hypothesis. An interesting implication of this hypothesis is that monetary union may increase the specialization of member countries, making them more vulnerable to asymmetric shocks.;The third essay, "Stabilizing Asymmetric Regional Shocks in a European Monetary Union," examines a set of stabilization schemes based on mutual insurance which offset transitory asymmetric shocks to the per capita real GDP of the European Community member countries. The transfers required to offset these shocks are estimated and examined, and the results suggest that they are of significant size but that mutual insurance is feasible. However, the results also indicate that transfers designed to offset asymmetric shocks across countries may increase the variability of real GDP over time for certain member countries.