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Currency unions in prospect and retrospect

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  • J.M.C. Santos Silva
  • Silvana Tenreyro

Abstract

We critically review the recent literature on currency unions, and discuss the methodological challenges posed by the empirical assessment of their costs and benefits. In the process, we provide evidence on the economic effects of the euro. In particular, and in contrast with estimates of the trade effect of other currency unions, we find that the impact of the euro on trade has been close to zero. After reviewing the costs and benefits, we conclude with some open questions on normative and positive aspects of the theory of currency unions, emphasizing the need for a unified welfare-based framework to weigh their costs and gains.

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File URL: http://eprints.lse.ac.uk/28738/
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Bibliographic Info

Paper provided by London School of Economics and Political Science, LSE Library in its series LSE Research Online Documents on Economics with number 28738.

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Length: 52 pages
Date of creation: 2010
Date of revision:
Handle: RePEc:ehl:lserod:28738

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Keywords: Currency union; Integration; Exchange Rage; Trade;

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  2. Keith Head & Thierry Mayer, 2013. "Gravity Equations: Workhorse, Toolkit, and Cookbook," Sciences Po Economics Discussion Papers 2013-02, Sciences Po Departement of Economics.
  3. Pels, 2010. "International Asset Holdings and the Euro," The Institute for International Integration Studies Discussion Paper Series iiisdp331, IIIS.
  4. Herwartz, Helmut & Weber, Henning, 2013. "The role of cross-sectional heterogeneity for magnitude and timing of the euro's trade effect," Journal of International Money and Finance, Elsevier, vol. 37(C), pages 48-74.
  5. De Sousa, Jose, 2011. "The currency union effect on trade is decreasing over time," MPRA Paper 35448, University Library of Munich, Germany.
  6. Felix Groba, 2011. "Determinants of Trade with Solar Energy Technology Components: Evidence on the Porter Hypothesis?," Discussion Papers of DIW Berlin 1163, DIW Berlin, German Institute for Economic Research.
  7. Auboin, Marc & Ruta, Michele, 2013. "The relationship between exchange rates and international trade: a literature review," World Trade Review, Cambridge University Press, vol. 12(03), pages 577-605, July.
  8. Ruy Lama & Pau Rabanal, 2012. "Deciding to Enter a Monetary Union," IMF Working Papers 12/240, International Monetary Fund.
  9. Etienne Farvaque & Norimichi Matsueda, 2010. "On the Sustainability of a Monetary Union under External Shocks: a Theoretical Result and Its Application to the Gulf Countries," Discussion Paper Series 66, School of Economics, Kwansei Gakuin University, revised Dec 2010.
  10. Geert Bekaert & Campbell R. Harvey & Christian T. Lundblad & Stephan Siegel, 2010. "The European Union, the Euro, and Equity Market Integration," NBER Working Papers 16583, National Bureau of Economic Research, Inc.
  11. Pedro Leao & Alfonso Palacio-Vera, 2011. "Can Portugal Escape Stagnation without Opting Out from the Eurozone?," Economics Working Paper Archive wp_664, Levy Economics Institute.
  12. Alexandra Hudson & Bas Straathof, 2010. "The Declining Impact of Exchange Rate Volatility on Trade," De Economist, Springer, vol. 158(4), pages 361-372, November.
  13. Keith Head & Thierry Mayer, 2013. "Gravity Equations: Workhorse, Toolkit, and Cookbook," Sciences Po publications 2013-02, Sciences Po.
  14. Marko Malovic & Malisa Djukic & Srdjan Redzepagic, 2011. "Maastricht Criteria at the Age of 18: Are They Converging, Which Party and to What End?," Book Chapters, Institute of Economic Sciences.
  15. María Pía Olivero & Yoto V. Yotov, 2012. "Dynamic gravity: endogenous country size and asset accumulation," Canadian Journal of Economics, Canadian Economics Association, vol. 45(1), pages 64-92, February.
  16. Bas Straathof & Paolo Calio, 2012. "Currency derivatives and the disconnection between exchange rate volatility and international trade," CPB Discussion Paper 203, CPB Netherlands Bureau for Economic Policy Analysis.

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