Formation and Dissolution of Monetary Unions: Evidence from Europe, and Lessons for Elsewhere
AbstractWith the establishment of the euro, many commentators have drawn positive lessons from European monetary union for monetary integration in other parts of the world. This paper argues that the European experience of the 1990s is richer than a simple story of the inevitability of monetary integration. The dissolution of the Yugoslav, Czechoslovak and Soviet currency areas between 1991 and 1993 meant that Europe had more independent currencies in 2002 than it did in 1991. These developments are not explained by the dominant theoretical framework for analysing currency domains, ie. the optimum currency area theory originating from Mundell and McKinnon. The crucial issues concerned who determines the conduct of monetary and fiscal policy, rather than the issues emphasized in OCA theory of whether macro policy will be effective or not. A typology of countries adopting a common currency distinguishes between microstates which use another country's currency for (private sector) transactions costs reasons, and currency unions involving larger states which are driven by (public sector) transactions arguments to do with adopting some form of common budget. Assessment of the relevance of OCA theory has implications for evaluating the prospects for monetary unions outside Europe.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by University of Adelaide, School of Economics in its series School of Economics Working Papers with number 2003-03.
Length: 34 pages
Date of creation: 2003
Date of revision:
monetary union; currency area;
Find related papers by JEL classification:
- F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
- F02 - International Economics - - General - - - International Economic Order; Noneconomic International Organizations;; Economic Integration and Globalization: General
- E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
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.:
- Stockman, Alan C, 2001.
"Optimal Central Bank Areas, Financial Intermediation, and Mexican Dollarization,"
Journal of Money, Credit and Banking,
Blackwell Publishing, vol. 33(2), pages 648-66, May.
- Alan C. Stockman, 2001. "Optimal central bank areas, financial intermediation, and Mexican dollarization," Proceedings, Federal Reserve Bank of Cleveland, pages 648-668.
- Schoors, Koen, 2003. "The effect of Soviet monetary disintegration on the collapse of trade between members of the Commonwealth of Independent States," Economic Systems, Elsevier, vol. 27(1), pages 1-26, March.
- Emla Fitzsimons & Vincent Hogan & J. Peter Neary, 1999.
"Explaining the Volume of North-South Trade in Ireland - A Gravity Model Approach,"
The Economic and Social Review,
Economic and Social Studies, vol. 30(4), pages 381-401.
- Fitzsimons, E. & Hogan, V. & Neary, J.P., 1999. "Explaining the volume of North-South Trade in Ireland: a Gravity Model Approach," Papers 99/14, College Dublin, Department of Political Economy-.
- Eichengreen, Barry, 1998.
"Does Mercosur Need a Single Currency?,"
Center for International and Development Economics Research, Working Paper Series
qt6fw631qn, Center for International and Development Economics Research, Institute for Business and Economic Research, UC Berkeley.
- Barry Eichengreen, 2000. "Does Mercosur Need a Single Currency?," International Finance 0003006, EconWPA.
- Barry Eichengreen, 1998. "Does Mercosur Need a Single Currency," NBER Working Papers 6821, National Bureau of Economic Research, Inc.
- Barry Eichengreen., 1998. "Does Mercosur Need a Single Currency?," Center for International and Development Economics Research (CIDER) Working Papers C98-103, University of California at Berkeley.
- Ronald McKinnon & Gunther Schnabl, 2002. "Synchronized Business Cycles in East Asia: Fluctuations in the Yen/Dollar Exchange Rate and China’s Stabilizing Role," Working Papers 02010, Stanford University, Department of Economics.
- Krugman, P., 1993. "What Do We Need to Know About the International Monetary System?," Princeton Studies in International Economics 190, International Economics Section, Departement of Economics Princeton University,.
- Nils Bjorksten, 2001. "The current state of New Zealand monetary union research," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 64, December.
- Xavier Debrun & Paul Masson & Catherine Pattillo, 2005.
"Monetary union in West Africa: who might gain, who might lose, and why?,"
Canadian Journal of Economics,
Canadian Economics Association, vol. 38(2), pages 454-481, May.
- Paul R. Masson & Xavier Debrun & Catherine A. Pattillo, 2002. "Monetary Union in West Africa: Who Might Gain, Who Might Lose, and Why?," IMF Working Papers 02/226, International Monetary Fund.
- Gros, Daniel & Thygesen, Niels, 1990. "The Institutional Approach to Monetary Union in Europe," Economic Journal, Royal Economic Society, vol. 100(402), pages 925-35, September.
- J. Ernesto L�pez-C�rdova and Chris Meissner., 2000.
"Exchange-Rate Regimes and International Trade: Evidence from the Classical Gold Standard Era,"
Center for International and Development Economics Research (CIDER) Working Papers
C00-118, University of California at Berkeley.
- Christopher M. Meissner, 2003. "Exchange-Rate Regimes and International Trade: Evidence from the Classical Gold Standard Era," American Economic Review, American Economic Association, vol. 93(1), pages 344-353, March.
- Lopez-Cordova, J. Ernesto & Meissner, Chris, 2000. "Exchange-Rate Regimes and International Trade: Evidence from the Classical Gold Standard Era," Center for International and Development Economics Research, Working Paper Series qt1b04r034, Center for International and Development Economics Research, Institute for Business and Economic Research, UC Berkeley.
- Dowd, Kevin & Greenaway, David, 1993. "Currency Competition, Network Externalities and Switching Costs: Towards an Alternative View of Optimum Currency Areas," Economic Journal, Royal Economic Society, vol. 103(420), pages 1180-89, September.
- Alessandra Casella & Jonathan Feinstein, 1988.
"Management of a Common Currency,"
NBER Working Papers
2740, National Bureau of Economic Research, Inc.
- Alessandra Casella and Jonathan Feinstein., 1988. "Management of a Common Currency," Economics Working Papers 8891, University of California at Berkeley.
- Casella, Alessandra & Feinstein, Jonathan, 1988. "Management of a Common Currency," Department of Economics, Working Paper Series qt5jv1h7nt, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
- Zeljko Bogetic, 2005. "Official Dollarization: Current Experiences and Issues, Cato Journal, Vol. 20, No. 2 (Fall 2000), 179-213," International Finance 0510006, EconWPA.
- repec:cto:journl:v:20:y:2000:i:2:p:179-213 is not listed on IDEAS
- Flandreau, Marc, 1993. "On the inflationary bias of common currencies : The Latin Union puzzle," European Economic Review, Elsevier, vol. 37(2-3), pages 501-506, April.
- Linda S. Goldberg & Barry W. Ickes & Randi Ryterman, 1994. "Departures from the Ruble Zone: The Implications of Adopting Independent Currencies," The World Economy, Wiley Blackwell, vol. 17(3), pages 293-322, 05.
- Pomfret, Richard, 2001. "The Economics of Regional Trading Arrangements," OUP Catalogue, Oxford University Press, number 9780199248872.
- C. Randall Henning, 2002.
"East Asian Financial Cooperation,"
Peterson Institute Press: Policy Analyses in International Economics,
Peterson Institute for International Economics, number pa68, November.
- Eichengreen, Barry, 1993. "European Monetary Unification," Journal of Economic Literature, American Economic Association, vol. 31(3), pages 1321-57, September.
- Dale Bails and Margie A. Tieslau, 2000. "The Impact of Fiscal Constitutions on State and Local Expenditures," Cato Journal, Cato Journal, Cato Institute, vol. 20(2), Fall.
- Thomas Willett & Edward Tower, 1970. "Currency areas and exchange-rate flexibility," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 105(1), pages 48-65, September.
- Thom, Rodney & Walsh, Brendan, 2002. "The effect of a currency union on trade: Lessons from the Irish experience," European Economic Review, Elsevier, vol. 46(6), pages 1111-1123, June.
- José de Sousa & Julie Lochard, 2005. "Do Currency Barriers Solve the Border Effect Puzzle? Evidence from the CFA Franc Zone," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 141(3), pages 422-441, October.
- Richard Pomfret, 2002. "The IMF and the Ruble Zone," Comparative Economic Studies, Palgrave Macmillan, vol. 44(4), pages 37-47, December.
- Angresano, James, 2004. "European Union integration lessons for ASEAN + 3: the importance of contextual specificity," Journal of Asian Economics, Elsevier, vol. 14(6), pages 909-926, January.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dmitriy Kvasov).
If references are entirely missing, you can add them using this form.