Deciding on Monetary Integration: An Operational Approach
AbstractWe develop a simple, n-country model to consider the costs and benefits of joining a monetary union. Our factor-OCA framework encompasses different approaches and allows us to consider the optimal composition of a monetary union for all the potential members. We illustrate the model in practice with various simulations and we develop two empirical applications based on expanding EMU and on whether there would be a benefit to deepening Nafta to be a monetary union. While some commentators have called for a one-world currency, we find full monetary integration has costs for some countries and benefits for others, perhaps explaining why this remains a controversial issue.
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Bibliographic InfoPaper provided by Harvard University, John F. Kennedy School of Government in its series Working Paper Series with number rwp07-041.
Date of creation: Sep 2007
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This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-08-31 (All new papers)
- NEP-CBA-2008-08-31 (Central Banking)
- NEP-CMP-2008-08-31 (Computational Economics)
- NEP-MAC-2008-08-31 (Macroeconomics)
- NEP-MON-2008-08-31 (Monetary Economics)
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