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Perspectives on a potential North American monetary union

  • Michael Chriszt
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    The idea of a single currency for the United States, Canada, and Mexico usually refers to one of two approaches: the unilateral adoption of the U.S. dollar by Canada and Mexico-dollarization-or monetary union, the development of a joint currency that could be managed by all three countries. ; This article examines the idea of monetary union in North America. The author discusses specific criteria for a single currency for North America as well as the pros and cons of a monetary union and dollarization in the North American context. The evidence presented suggests that Canada and perhaps even Mexico are candidates for forming a single-currency area with the United States at some stage. The article concludes that monetary union appears to hold several advantages over dollarization from the perspective of both the United States and its NAFTA partners. However, an important question remains to be answered: Are the NAFTA countries currently ready for a monetary union? The answer involves both economic and political variables as well as some practical implications. It seems unlikely that the United States, Canada, and Mexico will pursue this goal in the near future.

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    Article provided by Federal Reserve Bank of Atlanta in its journal Economic Review.

    Volume (Year): (2000)
    Issue (Month): Q4 ()
    Pages: 29-38

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    Handle: RePEc:fip:fedaer:y:2000:i:q4:p:29-38:n:v.85no.4
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    1. Velasco, A. & Chang, R., 1998. "The Asian Liquidity Crisis," Working Papers 98-27, C.V. Starr Center for Applied Economics, New York University.
    2. Giancarlo Corsetti & Paolo Pesenti & Nouriel Roubini, 1998. "What Caused the Asian Currency and Financial Crisis? Part I: A Macroeconomic Overview," NBER Working Papers 6833, National Bureau of Economic Research, Inc.
    3. Willem H. Buiter, 1999. "The EMU and the NAMU: What is the Case for North American Monetary Union?," Canadian Public Policy, University of Toronto Press, vol. 25(3), pages 285-305, September.
    4. 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.
    5. Roberto Chang, 2000. "Dollarization: a scorecard," Economic Review, Federal Reserve Bank of Atlanta, issue Q3, pages 1-12.
    6. Marco Espinosa & Steven Russell, 1996. "The Mexican economic crisis: alternative views," Economic Review, Federal Reserve Bank of Atlanta, issue Jan, pages 21-44.
    7. Jeffrey A. Frankel & Andrew K. Rose, 2000. "Estimating the Effect of Currency Unions on Trade and Output," NBER Working Papers 7857, National Bureau of Economic Research, Inc.
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