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Monetary Union and the Transaction Cost Savings of a Single Currency

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  • Hugo Rodríguez Mendizábal

Abstract

This paper computes the transaction cost savings derived from the European Monetary Union. A continuoustime, stochastic, Baumol‐like model is generalized to include several currencies and calibrated to fit European data. The analysis implies an upper bound for the savings derived from reductions in transaction costs of approximately 0.69% of Union GDP. Additionally, the magnitudes of the brokerage fee and the volatility of transactions, whose estimation has traditionally been difficult to address empirically, are approximated for Europe.

Suggested Citation

  • Hugo Rodríguez Mendizábal, 2002. "Monetary Union and the Transaction Cost Savings of a Single Currency," Review of International Economics, Wiley Blackwell, vol. 10(2), pages 263-277, May.
    • Handle: RePEc:bla:reviec:v:10:y:2002:i:2:p:263-277
    DOI: 10.1111/1467-9396.00331
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    Cited by:

    1. Maurice Obstfeld, 1998. "Open‐Economy Macroeconomics: Developments in Theory and Policy," Scandinavian Journal of Economics, Wiley Blackwell, vol. 100(1), pages 247-275, March.
    2. Alvarez, Fernando & Dixit, Avinash, 2014. "A real options perspective on the future of the Euro," Journal of Monetary Economics, Elsevier, vol. 61(C), pages 78-109.
    3. Bonpasse, Morrison, 2007. "The Single Global Currency - Common Cents for Business," MPRA Paper 6199, University Library of Munich, Germany.
    4. Timo Baas, 2014. "Estonia and the European Monetary Union – Are there Benefi ts from a “Late” Accession?," Ruhr Economic Papers 0489, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    5. Bonpasse, Morrison, 2008. "The Single Global Currency - Common Cents for Commerce," MPRA Paper 7002, University Library of Munich, Germany.
    6. Hugo Rodríguez, 1998. "The variability of money velocity in a generalized cash-in-advance model," Economics Working Papers 320, Department of Economics and Business, Universitat Pompeu Fabra.

    More about this item

    JEL classification:

    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions

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