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What Do We Now Know About Currency Unions?

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Author Info
Artis, Michael J

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Abstract

The paper presents the text of a lecture given at the Bank of England in December 2005 as the first in a series of lectures in memory of John Flemming. It provides a personal view of what the profession has learnt about currency unions as a result of the establishment and operation of the European Monetary Union. It argues that the salience of business cycle concurrence as a criterion for participation is probably less than used to be understood and for some countries borders on irrelevance. In any case the effects of union upon business cycle concurrence are themselves not obvious. It also appears that, after a period in which very large estimates of the trade effect of currency unions were widespread, more modest estimates are in order. The most unlooked-for effect is probably that which has occurred in the financial markets; country premia within the EMU are very small, offering a means for insurance against asymmetric shocks. Finally, the lessons of another, local, experiment in currency union is examined. But the useful lessons from this experiment (Ecco L’Euro) are found to be limited.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 5677.

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Date of creation: May 2006
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Handle: RePEc:cpr:ceprdp:5677

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Related research
Keywords: currency union EMU optimal currency area theory

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Find related papers by JEL classification:
E0 - Macroeconomics and Monetary Economics - - General
E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
F1 - International Economics - - Trade

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References listed on IDEAS
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  1. Alberto Alesina & Robert J. Barro, 2002. "Currency Unions," The Quarterly Journal of Economics, MIT Press, vol. 117(2), pages 409-436, May. [Downloadable!] (restricted)
    Other versions:
  2. Alejandro Micco & Ernesto Stein & Guillermo OrdoÒez, 2003. "The currency union effect on trade: early evidence from EMU," Economic Policy, CEPR, CES, MSH, vol. 18(37), pages 315-356, October. [Downloadable!] (restricted)
  3. Buiter, Willem H, 2000. "Optimal Currency Areas: Why Does The Exchange Rate Regime Matter?," CEPR Discussion Papers 2366, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  4. Karen K. Lewis, 1999. "Trying to Explain Home Bias in Equities and Consumption," Journal of Economic Literature, American Economic Association, vol. 37(2), pages 571-608, June. [Downloadable!] (restricted)
  5. Crucini, Mario J & Hess, Gregory D, 1999. "International and Intranational Risk Sharing," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
  6. Maurice Obstfeld, 2002. "Exchange Rates and Adjustment: Perspectives from the New Open Economy Macroeconomics," NBER Working Papers 9118, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  7. Helge Berger & Volker Nitsch, 2005. "Zooming Out: The Trade Effect of the Euro in Historical Perspective," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
  8. Richard E. Baldwin, 2006. "The euro's trade effect," Working Paper Series 594, European Central Bank. [Downloadable!]
  9. Frankel, Jeffrey A. & Rose, Andrew K., 1997. "Is EMU more justifiable ex post than ex ante?," European Economic Review, Elsevier, vol. 41(3-5), pages 753-760, April. [Downloadable!] (restricted)
  10. Michael Artis, 2003. "Is there a European Business Cycle?," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
  11. Michael Artis & Michael Ehrmann, 2000. "The Exchange Rate -a Shock-Absorber or Source of Shocks? A Study of Four Open Economies," EUI-RSCAS Working Papers 38, European University Institute (EUI), Robert Schuman Centre of Advanced Studies (RSCAS). [Downloadable!]
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  12. Rose, Andrew K, 1999. "One Money, One Market: Estimating the Effect of Common Currencies on Trade," CEPR Discussion Papers 2329, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  13. Jeffrey A. Frankel, 2003. "Experience of and Lessons from Exchange Rate Regime in Emerging Economies," NBER Working Papers 10032, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  14. Matthew B. Canzoneri & Javier Vallés & José Viñals, 1996. "Do Exchange Rate Move to Address International Macroeconomic Imbalances?," Banco de España Working Papers 9626, Banco de España.
    Other versions:
  15. Jeffrey A. Frankel & Andrew K. Rose, 1996. "The Endogeneity of the Optimum Currency Area Criteria," NBER Working Papers 5700, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
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