Web: www.econ.ku.dk/personal/henrikj/ Appendix

A. The underlying model in detail A.1. Utilities and private consumption There are two countries labeled H(ome) and F (oreign). These countries form a monetary union. The population of the union is a continuum of agents on the interval [0, 1]. The population on the segment [0, n) belongs to country H, while the population on [n, 1] belongs to country F. In period t, the utility of the representative household j living in country i is given by U jt = Et s=t βs−t