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Optimum Currency Areas and Key Currencies: Mundell I versus Mundell II


  • Ronald I. McKinnon


The East Asian economies are increasingly integrated in trade and direct investment. More than 50 per cent of their foreign trade is with each other. Both the high growth and level of trade integration is similar to what the western European economies achieved in the 1960s. So, in the new millennium, the inevitable question arises: is East Asia also an optimum currency area (OCA)? Despite the apparent success of EMU, many writers familiar with the East Asian scene think not. Taking the seminal papers of Robert Mundell as the starting point, this article first analyses traditional theorizing on the pros and cons of international monetary integration and then suggests new approaches to the problem of international risk-sharing in OCAs. Copyright Blackwell Publishing Ltd 2004.

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  • Ronald I. McKinnon, 2004. "Optimum Currency Areas and Key Currencies: Mundell I versus Mundell II," Journal of Common Market Studies, Wiley Blackwell, vol. 42(4), pages 689-715, November.
  • Handle: RePEc:bla:jcmkts:v:42:y:2004:i:4:p:689-715

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    References listed on IDEAS

    1. Frankel, Jeffrey A & Rose, Andrew K, 1998. "The Endogeneity of the Optimum Currency Area Criteria," Economic Journal, Royal Economic Society, vol. 108(449), pages 1009-1025, July.
    2. Ronald I. McKinnon, 2001. "The International Dollar Standard and the Sustainability of the U.S. Current Account Deficit," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 32(1), pages 227-241.
    3. Stephen Ching & Michael B. Devereux, 2003. "Mundell Revisited: a Simple Approach to the Costs and Benefits of a Single Currency Area," Review of International Economics, Wiley Blackwell, vol. 11(4), pages 674-691, September.
    4. Ronald McKinnon, 2001. "The International Dollar Standard and Sustainability of the U.S. Current Account Deficit," Working Papers 01013, Stanford University, Department of Economics.
    5. Barry Eichengreen & Ricardo Hausmann, 1999. "Exchange rates and financial fragility," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 329-368.
    6. Eichengreen, B., 1992. "Should the Maastricht Treaty be Saved?," Princeton Studies in International Economics 74, International Economics Section, Departement of Economics Princeton University,.
    7. Ronald I. McKinnon, 1996. "The Rules of the Game: International Money and Exchange Rates," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262133180, July.
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