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Sequencing Trade and Monetary Integration

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Author Info
Richard Pomfret (University of Adelaide, School of Economics)

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Abstract

Regional integration for at least the last sixty years has focused on trade integration. Balassa’s canonical taxonomy of regional trading arrangements is often interpreted as a sequence from free trade area through customs union and common market to economic union. In the 1980s the concept of deep integration went beyond trade with its focus on policy harmonization, which came to include monetary integration, but it presupposed trade integration as the first step in the regional integration sequence. In Asia there has been very little trade integration through regional agreements - ASEAN is the most ambitious project, but even there actual achievements in trade integration have been limited. When discussion of monetary integration began in East Asia after 1997, it was in the absence of trade integration. The conventional view would see this as an obstacle to greater regional integration, but some proponents of Asian regionalism saw monetary integration as a step towards promoting trade integration, reversing the orthodox sequence. The two theoretical literatures (customs union theory and optimal currency area theory) were distinct and there remains a disconnect between the trade and monetary integration literature. This paper re- evaluates the global cross-country evidence on the relationship between trade integration and monetary union. It then applies the results to the prospects for monetary union before trade integration in East Asia, and to the consequences of monetary union for trade integration.

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Paper provided by EconWPA in its series Others with number 0502004.

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Date of creation: 03 Feb 2005
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Handle: RePEc:wpa:wuwpot:0502004

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Related research
Keywords: currency union; customs union;

Find related papers by JEL classification:
F02 - International Economics - - General - - - International Economic Order; Noneconomic International Organizations;; Economic Integration and Globalization: General
F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions

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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.:
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  2. Marc Flandreau & Mathilde Maurel, 2005. "Monetary Union, Trade Integration, and Business Cycles in 19th Century Europe," Open Economies Review, Springer, vol. 16(2), pages 135-152, April. [Downloadable!] (restricted)
  3. 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)
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  4. Flandreau, Marc & Maurel, Mathilde, 2001. "Monetary Union, Trade Integration, and Business Cycles in 19th Century Europe: Just Do It," CEPR Discussion Papers 3087, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  5. Hamid Faruqee, 2004. "Measuring the Trade Effects of EMU," IMF Working Papers 04/154, International Monetary Fund. [Downloadable!]
  6. J. Lopez-Cordova & Chris Meissner, 2000. "Exchange-Rate Regimes and International Trade: Evidence from the Classical Gold Standard Era," Center for International and Development Economics Research, Working Paper Series 1003, Center for International and Development Economics Research, Institute for Business and Economic Research, UC Berkeley. [Downloadable!]
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  7. Maurel, Mathilde, 2004. "Current account constraint as a barrier to international trade: the evidence from the European enlargement process?," Economic Systems, Elsevier, vol. 28(3), pages 301-317, September. [Downloadable!] (restricted)
  8. 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,.
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  10. Kiichiro Fukasaku, 1992. "Economic Regionalisation and Intra-Industry Trade: Pacific-Asian Perspectives," OECD Development Centre Working Papers 53, OECD, Development Centre. [Downloadable!]
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  14. Graham Bird & Ramkishen Rajan, 2002. "Optimal currency baskets and the third currency phenomenon: exchange rate policy in Southeast Asia," Journal of International Development, John Wiley & Sons, Ltd., vol. 14(8), pages 1053-1073. [Downloadable!]
  15. 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-.
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  16. 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. [Downloadable!] (restricted)
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  18. 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. [Downloadable!] (restricted)
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Cited by:
(explanations, 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.)

  1. Peter Wilson & Choy Keen Meng, 2006. "Prospects For Enhanced Exchange Rate Cooperation in East Asia: Some Preliminary Findings from Generalized PPP Theory," SCAPE Policy Research Working Paper Series 0601, National University of Singapore, Department of Economics, SCAPE. [Downloadable!]
    Other versions:
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