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Currency Unions in Prospect and Retrospect

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  • J.M.C. Santos Silva
  • Silvana Tenreyro

    ()
    (Department of Economics, University of Essex, Colchester CO4 3SQ, United Kingdom, and CEMAPRE
    Department of Economics, London School of Economics and Political Science, London WC2A 2AE, United Kingdom, and CREI, CEP, and CEPR)

Abstract

We critically review the recent literature on currency unions and discuss the methodological challenges posed by the empirical assessment of their costs and benefits. In the process, we provide evidence on the economic effects of the euro. In particular, and in contrast with estimates of the trade effect of other currency unions, we find that the euro's impact on trade has been close to zero. After reviewing the costs and benefits of joining a currency union, we conclude with some open questions on normative and positive aspects of the theory of currency unions, emphasizing the need for a unified welfare-based framework to weigh their costs and gains.

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File URL: http://www.annualreviews.org/doi/abs/10.1146/annurev.economics.102308.124508
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Bibliographic Info

Article provided by Annual Reviews in its journal Annual Review of Economics.

Volume (Year): 2 (2010)
Issue (Month): 1 (09)
Pages: 51-74

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Handle: RePEc:anr:reveco:v:2:y:2010:p:51-74

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Related research

Keywords: effects of currency unions; euro; monetary union; optimum currency areas; trade;

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Citations

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Cited by:
  1. De Sousa, Jose, 2011. "The currency union effect on trade is decreasing over time," MPRA Paper 35448, University Library of Munich, Germany.
  2. Auboin, Marc & Ruta, Michele, 2013. "The relationship between exchange rates and international trade: a literature review," World Trade Review, Cambridge University Press, vol. 12(03), pages 577-605, July.
  3. repec:ese:iserwp:2014-14 is not listed on IDEAS
  4. Head, Keith & Mayer, Thierry, 2013. "Gravity Equations: Workhorse, Toolkit, and Cookbook," CEPR Discussion Papers 9322, C.E.P.R. Discussion Papers.
  5. Marko Malovic & Malisa Djukic & Srdjan Redzepagic, 2011. "Maastricht Criteria at the Age of 18: Are They Converging, Which Party and to What End?," Book Chapters, Institute of Economic Sciences.
  6. Felix Groba, 2011. "Determinants of Trade with Solar Energy Technology Components: Evidence on the Porter Hypothesis?," Discussion Papers of DIW Berlin 1163, DIW Berlin, German Institute for Economic Research.
  7. Etienne Farvaque & Norimichi Matsueda, 2010. "On the Sustainability of a Monetary Union under External Shocks: a Theoretical Result and Its Application to the Gulf Countries," Discussion Paper Series 66, School of Economics, Kwansei Gakuin University, revised Dec 2010.
  8. Geert Bekaert & Campbell R. Harvey & Christian T. Lundblad & Stephan Siegel, 2010. "The European Union, the Euro, and Equity Market Integration," NBER Working Papers 16583, National Bureau of Economic Research, Inc.
  9. Pels, 2010. "International Asset Holdings and the Euro," The Institute for International Integration Studies Discussion Paper Series iiisdp331, IIIS.
  10. Bas Straathof & Paolo Calio, 2012. "Currency derivatives and the disconnection between exchange rate volatility and international trade," CPB Discussion Paper 203, CPB Netherlands Bureau for Economic Policy Analysis.
  11. Emanuele Ciani & Paul Fisher, 2013. "Dif-in-dif estimators of multiplicative treatment effects," Economics Discussion Papers 725, University of Essex, Department of Economics.
  12. Herwartz, Helmut & Weber, Henning, 2013. "The role of cross-sectional heterogeneity for magnitude and timing of the euro's trade effect," Journal of International Money and Finance, Elsevier, vol. 37(C), pages 48-74.
  13. Keith Head & Thierry Mayer, 2013. "Gravity Equations: Workhorse, Toolkit, and Cookbook," Sciences Po publications 2013-02, Sciences Po.
  14. Alexandra Hudson & Bas Straathof, 2010. "The Declining Impact of Exchange Rate Volatility on Trade," De Economist, Springer, vol. 158(4), pages 361-372, November.
  15. María Pía Olivero & Yoto V. Yotov, 2012. "Dynamic gravity: endogenous country size and asset accumulation," Canadian Journal of Economics, Canadian Economics Association, vol. 45(1), pages 64-92, February.
  16. Ruy Lama & Pau Rabanal, 2012. "Deciding to Enter a Monetary Union: TheRole of Trade and Financial Linkages," IMF Working Papers 12/240, International Monetary Fund.
  17. Pedro Leao & Alfonso Palacio-Vera, 2011. "Can Portugal Escape Stagnation without Opting Out from the Eurozone?," Economics Working Paper Archive wp_664, Levy Economics Institute.

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