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A Stochastic Simulation Model of an Optimum Currency Area

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Author Info
Michel Beine ()
FréDéric Docquier ()

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Abstract

In this paper, we develop a two-country stochastic simulation model based on the theory of optimum currency areas, which studies the desirability of a monetary union. Extending the general equilibrium model of Ricci (1995), we introduce the intertemporal dimension, which allows to deal more accurately with labor mobility and shock dynamics. We analyse the importance of shocks asymmetries and investigate the role of labor mobility. Furthermore, we illustrate the influence of trade openness and the impact of a fiscal federalism system, assuming a specific transfer allocation rule based on the relative evolution of unemployment between the two countries. Copyright Kluwer Academic Publishers 1998

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File URL: http://hdl.handle.net/10.1023/A:1008216701051
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Publisher Info
Article provided by Springer in its journal Open Economies Review.

Volume (Year): 9 (1998)
Issue (Month): 3 (July)
Pages: 229-257
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Handle: RePEc:kap:openec:v:9:y:1998:i:3:p:229-257

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Related research
Keywords: optimum currency area; international labor mobility; fiscal federalism;

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Beetsma, R.M.W.J. & Bovenberg, A.L., 1995. "Designing Fiscal and Monetary policy Institutions for a European Monetary Union," DELTA Working Papers 95-21, DELTA (Ecole normale supérieure).
  2. Bayoumi, Tamim & Eichengreen, Barry, 1992. "Shocking Aspects of European Monetary Unification," CEPR Discussion Papers 643, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  3. Sachs, Jeffrey & Sala-i-Martin, Xavier, 1992. "Fiscal Federalism and Optimum Currency Areas: Evidence for Europe from the United States," CEPR Discussion Papers 632, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  4. Olivier Jean Blanchard & Lawrence F. Katz, 1992. "Regional Evolutions," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 23(1992-1), pages 1-76. [Downloadable!]
  5. Beetsma, R. & Bovenberg, L., 1995. "Designing Fiscal and Monetary Institutions for a European Monetary Union," Discussion Paper 58, Tilburg University, Center for Economic Research. [Downloadable!]
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  6. Masson, Paul R & Taylor, Mark P, 1992. "Common Currency Areas and Currency Unions: An Analysis of the Issues," CEPR Discussion Papers 617, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  7. Fatas, Antonio, 1997. "EMU: Countries or regions? Lessons from the EMS experience," European Economic Review, Elsevier, vol. 41(3-5), pages 743-751, April. [Downloadable!] (restricted)
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  8. Bayoumi, Tamim, 1994. "A Formal Model of Optimum Currency Areas," CEPR Discussion Papers 968, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  9. Melitz, Jacques, 1995. "The current impasse in research on optimum currency areas," European Economic Review, Elsevier, vol. 39(3-4), pages 492-500, April. [Downloadable!] (restricted)
  10. Barry Eichengreen., 1990. "Is Europe an Optimum Currency Area?," Economics Working Papers 90-151, University of California at Berkeley.
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  11. Mélitz, Jacques, 1991. "A Suggested Reformulation of the Theory of Optimal Currency Areas," CEPR Discussion Papers 590, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Zahir, Antia & Djoudad, Ramdane & St-Amant, Pierre, 1999. "Canada’s Exchange Rate Regime and North American Economic Integration: The Role of Risk-Sharing Mechanisms," Working Papers 99-17, Bank of Canada. [Downloadable!]
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