IDEAS home Printed from https://ideas.repec.org/a/kap/iaecre/v19y2013i3p259-27110.1007-s11294-013-9404-5.html
   My bibliography  Save this article

The Optimum Currency Area Puzzle

Author

Listed:
  • Filippo Cesarano

Abstract

The theory of optimum currency areas, suggesting the redrawing of currency areas across countries or splitting of national money into several currencies, is at odds with the one-money-one-country pattern that has dominated monetary history for 26 centuries. This paper puts forward an equilibrium approach which, by stressing the influence of the border effect on intranational adjustment, solves the puzzle and analyzes the closely related issue of the viability of monetary unions and regional specialization. Copyright International Atlantic Economic Society 2013

Suggested Citation

  • Filippo Cesarano, 2013. "The Optimum Currency Area Puzzle," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 19(3), pages 259-271, August.
    • Handle: RePEc:kap:iaecre:v:19:y:2013:i:3:p:259-271:10.1007/s11294-013-9404-5
    DOI: 10.1007/s11294-013-9404-5
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/s11294-013-9404-5
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/s11294-013-9404-5?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Dellas, Harris & Tavlas, George S., 2009. "An optimum-currency-area odyssey," Journal of International Money and Finance, Elsevier, vol. 28(7), pages 1117-1137, November.
    2. Frankel, Jeffrey A & Rose, Andrew K, 1998. "The Endogeneity of the Optimum Currency Area Criteria," Economic Journal, Royal Economic Society, vol. 108(449), pages 1009-1025, July.
    3. R. A. Mundell, 2000. "Erratum: A Reconsideration of the Twentieth Century," American Economic Review, American Economic Association, vol. 90(5), pages 1535-1535, December.
    4. Filippo Cesarano, 2011. "The Political and Economic Dimension of Monetary Unions," Open Economies Review, Springer, vol. 22(5), pages 985-996, November.
    5. repec:cto:journl:v:24:y:2004:i:1-2:p:163-170 is not listed on IDEAS
    6. Michael D. Bordo, 2004. "The United States as a Monetary Union and the Euro: A Historical Perspective," Cato Journal, Cato Journal, Cato Institute, vol. 24(1-2), pages 163-170, Spring/Su.
    7. David Laidler, 2010. "The Monetary Economy and the Economic Crisis," University of Western Ontario, Economic Policy Research Institute Working Papers 20101, University of Western Ontario, Economic Policy Research Institute.
    8. Robert A. Mundell, 1972. "The future of the International Financial System," Palgrave Macmillan Books, in: A. L. Keith Acheson & John F. Chant & Martin F. J. Prachowny (ed.), Bretton Woods Revisited, pages 91-103, Palgrave Macmillan.
    9. Jeffrey A. Frankel, 1999. "No Single Currency Regime is Right for All Countries or At All Times," NBER Working Papers 7338, National Bureau of Economic Research, Inc.
    10. George S. Tavlas, 2009. "Optimum‐Currency‐Area Paradoxes," Review of International Economics, Wiley Blackwell, vol. 17(3), pages 536-551, August.
    11. Thomas D. Willett & Orawan Permpoon & Clas Wihlborg, 2010. "Endogenous OCA Analysis and the Early Euro Experience," The World Economy, Wiley Blackwell, vol. 33(7), pages 851-872, July.
    12. Robert E. Lucas Jr., 2003. "Macroeconomic Priorities," American Economic Review, American Economic Association, vol. 93(1), pages 1-14, March.
    13. George S. Tavlas, 1993. "The ‘New’ Theory of Optimum Currency Areas," The World Economy, Wiley Blackwell, vol. 16(6), pages 663-685, November.
    14. James C. Ingram, 1959. "State and Regional Payments Mechanisms," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 73(4), pages 619-632.
    15. Filippo Cesarano, 2006. "The Origins of the Theory of Optimum Currency Areas," History of Political Economy, Duke University Press, vol. 38(4), pages 711-731, Winter.
    16. Robert A. Mundell, 2000. "A Reconsideration of the Twentieth Century," American Economic Review, American Economic Association, vol. 90(3), pages 327-340, June.
    17. Eichengreen, B., 1992. "Should the Maastricht Treaty be Saved?," Princeton Studies in International Economics 74, International Economics Section, Departement of Economics Princeton University,.
    18. Lars Jonung & Eoin Drea, 2010. "It Can't Happen, It's a Bad Idea, It Won't Last: U.S. Economists on the EMU and the Euro, 1989–2002," Econ Journal Watch, Econ Journal Watch, vol. 7(1), pages 1-4–52, January.
    19. Boyer, Russell S., 2009. "Reflections on Milton Friedman's contributions to open economy money/macro," Journal of International Money and Finance, Elsevier, vol. 28(7), pages 1097-1116, November.
    20. Otmar Issing, 2010. "It Has Happened—And It Will Continue to Succeed," Econ Journal Watch, Econ Journal Watch, vol. 7(1), pages 66-72, January.
    21. Friedman, Benjamin M., 1979. "Optimal expectations and the extreme information assumptions of `rational expectations' macromodels," Journal of Monetary Economics, Elsevier, vol. 5(1), pages 23-41, January.
    22. Filippo Cesarano, 1997. "Currency Areas and Equilibrium," Open Economies Review, Springer, vol. 8(1), pages 51-59, January.
    23. C. A. E. Goodhart, 1995. "The Political Economy of Monetary Union (1995)," Palgrave Macmillan Books, in: The Central Bank and the Financial System, chapter 8, pages 156-202, Palgrave Macmillan.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Mirdala, Rajmund & Ruščáková, Anna, 2015. "On Origins and Implications of the Sovereign Debt Crisis in the Euro Area," MPRA Paper 68859, University Library of Munich, Germany.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Filippo Cesarano, 2011. "The Political and Economic Dimension of Monetary Unions," Open Economies Review, Springer, vol. 22(5), pages 985-996, November.
    2. Filippo Cesarano, 2006. "The equilibrium approach to optimum currency areas," Banca Nazionale del Lavoro Quarterly Review, Banca Nazionale del Lavoro, vol. 59(237), pages 193-209.
    3. Filippo Cesarano, 2006. "The equilibrium approach to optimum currency areas," BNL Quarterly Review, Banca Nazionale del Lavoro, vol. 59(237), pages 193-209.
    4. Filippo Cesarano, 2006. "Optimum currency areas: a policy view," BNL Quarterly Review, Banca Nazionale del Lavoro, vol. 59(239), pages 317-332.
    5. Mohd Hussain Kunroo, 2015. "Theory of Optimum Currency Areas," Review of Market Integration, India Development Foundation, vol. 7(2), pages 87-116, August.
    6. Handler, Heinz, 2013. "The eurozone: piecemeal approach to an optimum currency area," MPRA Paper 67183, University Library of Munich, Germany.
    7. Marc-Alexandre Sénégas, 2010. "La théorie des zones monétaires optimales au regard de l'euro : Quels enseignements après dix années d'union économique et monétaire en Europe ?," Revue d'économie politique, Dalloz, vol. 120(2), pages 379-419.
    8. Filippo Cesarano, 2006. "Optimum currency areas: a policy view," Banca Nazionale del Lavoro Quarterly Review, Banca Nazionale del Lavoro, vol. 59(239), pages 317-332.
    9. Soós, Károly Attila, 2021. "Az optimális valutaövezet két elmélete - aszimmetrikus sokkok és nemzetközi pénzügyi integráció [Principles of optimal currency areas: asymmetric shocks and international financial integration]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(12), pages 1250-1275.
    10. George S. Tavlas, 2009. "Optimum‐Currency‐Area Paradoxes," Review of International Economics, Wiley Blackwell, vol. 17(3), pages 536-551, August.
    11. Balogun, Emmanuel Dele, 2008. "An Empirical Test of Trade Gravity Model Criteria for the West African Monetary Zone (WAMZ)," MPRA Paper 7083, University Library of Munich, Germany.
    12. Peter B. Kenen, 2000. "Currency Areas, Policy Domains, and the Institutionalization of Fixed Exchange Rates," CEP Discussion Papers dp0467, Centre for Economic Performance, LSE.
    13. Praussello, Franco, 2012. "The Theory of Endogenous Optimum Currency Areas: A Critical Note - La teoria delle aree monetarie ottimali endogene: una nota critica," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 65(1), pages 83-95.
    14. Michael Bordo & Harold James, 2006. "One world money, then and now," International Economics and Economic Policy, Springer, vol. 3(3), pages 395-407, December.
    15. Lars Jonung, 2002. "EMU and the Euro - The First Ten Years. Challenges to the sustainability and price stability of the euro area - what does history tell us?," EUI-RSCAS Working Papers 46, European University Institute (EUI), Robert Schuman Centre of Advanced Studies (RSCAS).
    16. George Demopoulos & Nicholas Yannacopoulos, 1999. "Conditions for Optimality of a Currency Area," Open Economies Review, Springer, vol. 10(3), pages 289-303, July.
    17. Andrea Bonilla‐Bolaños, 2021. "A step further in the theory of regional integration: A look at the South American integration strategy," Journal of International Development, John Wiley & Sons, Ltd., vol. 33(5), pages 845-873, July.
    18. Adu, Raymond & Litsios, Ioannis & Baimbridge, Mark, 2019. "Real exchange rate and asymmetric shocks in the West African Monetary Zone (WAMZ)," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 59(C), pages 232-249.
    19. Zsolt Darvas & György Szapáry, 2008. "Business Cycle Synchronization in the Enlarged EU," Open Economies Review, Springer, vol. 19(1), pages 1-19, February.
    20. Crespo-Cuaresma, Jesús & Fernández-Amador, Octavio, 2013. "Business cycle convergence in EMU: A first look at the second moment," Journal of Macroeconomics, Elsevier, vol. 37(C), pages 265-284.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:iaecre:v:19:y:2013:i:3:p:259-271:10.1007/s11294-013-9404-5. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.