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Should Finland and Sweden Form a Monetary Union?

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  • Lars Jonung
  • Fredrik Sjöholm

Abstract

This paper surveys the future exchange rate policy of Finland and Sweden using the theory of optimal currency areas as a framework for the analysis. We examine which countries are most suitable to form a currency union with Finland and Sweden. The Finnish and Swedish economies display great similarities regarding industrial structure, business cycle patterns, migration and the design of economic policies. There are substantial differences between on the one hand Finland and Sweden, and on the other, many EU countries which are potential members of a future EMU. Our calculations give support for a Finnish-Swedish currency union and put a Finnish-Swedish membership of the EMU into question. Our results stress the importance of Finnish-Swedish co-operation in monetary matters. This could take many forms, of which a monetary union is one.
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Suggested Citation

  • Lars Jonung & Fredrik Sjöholm, 1999. "Should Finland and Sweden Form a Monetary Union?," The World Economy, Wiley Blackwell, vol. 22(5), pages 683-700, July.
  • Handle: RePEc:bla:worlde:v:22:y:1999:i:5:p:683-700
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    References listed on IDEAS

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    1. Benjamin J. Cohen, 1993. "Beyond Emu: The Problem Of Sustainability," Economics and Politics, Wiley Blackwell, vol. 5(2), pages 187-203, July.
    2. George S. Tavlas, 1993. "The ‘New’ Theory of Optimum Currency Areas," The World Economy, Wiley Blackwell, vol. 16(6), pages 663-685, November.
    3. Fleming, J Marcus, 1971. "On Exchange Rate Unification," Economic Journal, Royal Economic Society, vol. 81(323), pages 467-488, September.
    4. Frankel, Jeffrey A. & Rose, Andrew K., 1997. "Is EMU more justifiable ex post than ex ante?," European Economic Review, Elsevier, vol. 41(3-5), pages 753-760, April.
    5. U. Michael Bergman & Michael M. Hutchison & Yin-Wong Cheung, "undated". "Should the Nordic Countries Join A European Monetary Union? An Empirical Analysis," EPRU Working Paper Series 97-21, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
    6. Agathe Cote, "undated". "Exchange Rate Volatility and Trade: A Survey," Staff Working Papers 94-5, Bank of Canada.
    7. Lundborg, Per, 1991. " Determinants of Migration in the Nordic Labor Market," Scandinavian Journal of Economics, Wiley Blackwell, vol. 93(3), pages 363-375.
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    Cited by:

    1. Constantinos Alexiou, 2011. "“When the Bough Breaks” Making Sense of the Greek Economic ‘Waterloo’," International Journal of Economics and Financial Issues, Econjournals, vol. 1(3), pages 123-132, September.
    2. Mkenda, Beatrice Kalinda, 2001. "Is East Africa an Optimum Currency Area?," Working Papers in Economics 41, University of Gothenburg, Department of Economics.
    3. Michael D. Bordo & Lars Jonung, 1999. "The Future of EMU: What Does the History of Monetary Unions Tell Us?," NBER Working Papers 7365, National Bureau of Economic Research, Inc.
    4. Bystrom, Hans N.E. & Olofsdotter, Karin & Soderstrom, Lars, 2005. "Is China an optimum currency area?," Journal of Asian Economics, Elsevier, vol. 16(4), pages 612-634, August.
    5. Thomas Kigabo RUSUHUZWA & Paul Robert MASSON, 2012. "Design and Implementation of a Common Currency Area in the East African Community," Working Papers tecipa-451, University of Toronto, Department of Economics.

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    JEL classification:

    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions

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