Independent Currency Unions, Growth, and Inflation
AbstractDuring the last few years, there has been a renewed interest in currency unions. This is the result both of the recent wave of currency crises as well as the implementation of the euro. In this paper, the authors use panel data for 1970-98 to investigate economic performance under historical independent currency unions (ICUs) along three dimensions: GDP per capital growth, growth volatility, and inflation. They use a treatment effects model that estimates jointly the probability of having a common currency and its effect on performance. The authors find that ICU countries have had a significantly lower rate of inflation, but macroeconomic volatility has been higher. Also, ICU countries have grown faster than with currency nations, but the East Caribbean Currency Area countries are found to be the driving force behind this result.
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Bibliographic InfoArticle provided by Institute for Monetary and Economic Studies, Bank of Japan in its journal Monetary and Economic Studies.
Volume (Year): 20 (2002)
Issue (Month): S1 (December)
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Find related papers by JEL classification:
- O24 - Economic Development, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
- F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
- O47 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
- F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
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