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Optimal Currency Areas

In: NBER Macroeconomics Annual 2002, Volume 17

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  • Alberto Alesina
  • Robert J. Barro
  • Silvana Tenreyro

Abstract

As the number of independent countries increases and their economies become more integrated, we would expect to observe more multi-country currency unions. This paper explores the pros and cons for different countries to adopt as an anchor the dollar, the euro, or the yen. Although there appear to be reasonably well-defined euro and dollar areas, there does not seem to be a yen area. We also address the question of how trade and co-movements of outputs and prices would respond to the formation of a currency union. This response is important because the decision of a country to join a union would depend on how the union affects trade and co-movements.

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This chapter was published in:

  • Mark Gertler & Kenneth Rogoff, 2003. "NBER Macroeconomics Annual 2002, Volume 17," NBER Books, National Bureau of Economic Research, Inc, number gert03-1.
    This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number 11077.

    Handle: RePEc:nbr:nberch:11077

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