IDEAS home Printed from
MyIDEAS: Login to save this article or follow this journal

The EMU and the NAMU: What is the Case for North American Monetary Union?

  • Willem H. Buiter

The paper considers the pros and cons for Canada of monetary union between Canada and the United States. The current Canadian monetary arrangements, a flexible exchange rate and an inflation target, are contrasted both with a unilateral adoption by Canada and the US dollar and with a full, formally symmetric monetary union. Macroeconomic transactions costs savings argue in favour of either form of monetary union. Seigniorage considerations argue against unilateral adoption of the US dollar, but in favour of a formally symmetric monetary union. Loss of the lender of last resort is a powerful argument against unilateral monetary union. The optimal currency area arguments (which concern the macroeconomic stabilization aspects of a permanently fixed exchange rate) probably favour either form of monetary union. The shock-absorber properties of a flexible exchange rate are dominated by the extraneous instability and excess volatility inherent in a market-determined exchange rate when financial markets are highly integrated. On balance, the economic arguments favour a full, formally symmetric monetary union but not the unilateral adoption of the US dollar. Because of the absence of any democratic political institutions spanning both Canada and the United States, the political arguments against any form of monetary union are overwhelming. Without a North American Political Union, the transfer of national sovereignty to a supranational central bank would lack political legitimacy. The lack of institutions for ensuring the political accountability of a North American Central Bank means that NAMU is unlikely to happen and that, if it were to happen, it is unlikely to survive.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: only available to JSTOR subscribers

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by University of Toronto Press in its journal Canadian Public Policy.

Volume (Year): 25 (1999)
Issue (Month): 3 (September)
Pages: 285-305

in new window

Handle: RePEc:cpp:issued:v:25:y:1999:i:3:p:285-305
Contact details of provider: Postal: University of Toronto Press Journals Division 5201 Dufferin Street Toronto, Ontario, Canada M3H 5T8
Web page:

Order Information: Web: Email:

References listed on IDEAS
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.:

as in new window
  1. Dowd, Kevin & Greenaway, David, 1993. "Currency Competition, Network Externalities and Switching Costs: Towards an Alternative View of Optimum Currency Areas," Economic Journal, Royal Economic Society, vol. 103(420), pages 1180-89, September.
  2. Buiter, William H & Purvis, Douglas D, 1980. "Oil, Disinflation, and Export Competitiveness : A Model of the "Dutch Disease"," The Warwick Economics Research Paper Series (TWERPS) 185, University of Warwick, Department of Economics.
  3. W.H. Buiter, 1999. "Alice in Euroland," CEP Discussion Papers dp0423, Centre for Economic Performance, LSE.
  4. Buiter, Willem H, 1997. "The Economic Case for Monetary Union in the European Union," Review of International Economics, Wiley Blackwell, vol. 5(4), pages 10-35, Supplemen.
  5. Fidrmuc, Jan & Horvath, Julius & Fidrmuc, Jarko, 1999. "Stability of monetary unions: Lessons from the break-up of Czechoslovakia," ZEI Working Papers B 17-1999, ZEI - Center for European Integration Studies, University of Bonn.
  6. Masson, Paul R & Taylor, Mark P, 1992. "Common Currency Areas and Currency Unions: An Analysis of the Issues," CEPR Discussion Papers 617, C.E.P.R. Discussion Papers.
  7. Engel, C. & Rogers, J.H., 1995. "How Wide is the Border?," Papers 4-95-16, Pennsylvania State - Department of Economics.
  8. Laidler, David, 1999. "The Exchange Rate Regime and Canada's Monetary Order," Working Papers 99-7, Bank of Canada.
  9. Gordon G. Thiessen, 1998. "The Canadian Experience with Targets for Inflation Control," Canadian Public Policy, University of Toronto Press, vol. 24(4), pages 415-428, December.
  10. Barry Eichengreen., 1996. "On the Links Between Monetary and Political Integration," Center for International and Development Economics Research (CIDER) Working Papers C96-077, University of California at Berkeley.
  11. Lucas, Robert Jr, 1976. "Econometric policy evaluation: A critique," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 1(1), pages 19-46, January.
  12. Bayoumi, Tamim & Masson, Paul R, 1994. "Fiscal Flows in the United States and Canada: Lessons for Monetary Union in Europe," CEPR Discussion Papers 1057, C.E.P.R. Discussion Papers.
  13. William Poole, 1969. "Optimal choice of monetary policy instruments in a simple stochastic macro model," Special Studies Papers 2, Board of Governors of the Federal Reserve System (U.S.).
  14. Willem H. Buiter & Nikolaos Panigirtzoglou, 1999. "Liquidity Traps: How to Avoid Them and How to Escape Them," NBER Working Papers 7245, National Bureau of Economic Research, Inc.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:cpp:issued:v:25:y:1999:i:3:p:285-305. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Prof. Werner Antweiler)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.