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Effects of international monetary integration on inflation, economic growth and current account

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  • Stanisic, Nenad

Abstract

There are various benefits which countries could derive from the renouncement of a national currency hallmarked by unstable external and internal values. The most evident one is the reduction of a long-term inflation rate. The objective of this paper is to test the hypothesis of the positive influence which monetary integration exerts on monetary stability and economic growth. On the other hand, monetary integration can also cause certain economic problems to countries economies, such as the one of the balance-of-payments adjustment. Hence this paper surveys its influence on the current account balance of national economies. The hypotheses are tested empirically by examining the sample of 42 countries from different regions and of different development levels. The results suggest that the monetary integration influences the inflation reduction in developing countries, but not the achieved economic growth rates. At the same time, the results indicate that monetary integration contributes to an increase in the current account deficit of developing countries, but not of developed ones.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 38938.

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Date of creation: 06 Feb 2012
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Publication status: Published in Economic Horizons 1.12(2012): pp. 3-13
Handle: RePEc:pra:mprapa:38938

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Keywords: international monetary integration; economic growth; inflation; current account;

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  1. Sebastian Edwards, 2001. "Dollarization and Economic Performance: An Empirical Investigation," NBER Working Papers 8274, National Bureau of Economic Research, Inc.
  2. Sebastian Edwards & I. Igal Magendzo, 2003. "Strict Dollarization and Economic Performance: An Empirical Investigation," NBER Working Papers 9820, National Bureau of Economic Research, Inc.
  3. Edwards, Sebastian, 2002. "The great exchange rate debate after Argentina," The North American Journal of Economics and Finance, Elsevier, vol. 13(3), pages 237-252, December.
  4. Sebastian Edwards & I. Igal Magendzo, 2001. "Dollarization, Inflation and Growth," NBER Working Papers 8671, National Bureau of Economic Research, Inc.
  5. Eduardo Levy-Yeyati & Federico Sturzenegger, 2003. "To Float or to Fix: Evidence on the Impact of Exchange Rate Regimes on Growth," American Economic Review, American Economic Association, vol. 93(4), pages 1173-1193, September.
  6. Robert A. Mundell, 1991. "Do Exchange Rates Work? Another View," IMF Working Papers 91/37, International Monetary Fund.
  7. Barry Eichengreen., 1994. "History and Reform of the International Monetary System," Center for International and Development Economics Research (CIDER) Working Papers C94-041, University of California at Berkeley.
  8. Sebastian Edwards, 2002. "The Great Exchange Rate Debate after Argentina," Working Papers 74, Oesterreichische Nationalbank (Austrian Central Bank).
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