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Perspectives on a potential North American monetary union

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  • Michael J. Chriszt

Abstract

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.

Suggested Citation

  • Michael J. Chriszt, 2000. "Perspectives on a potential North American monetary union," Economic Review, Federal Reserve Bank of Atlanta, issue Q4, pages 29-38.
  • Handle: RePEc:fip:fedaer:y:2000:i:q4:p:29-38:n:v.85no.4
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    References listed on IDEAS

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    1. Thomas Willett & Edward Tower, 1970. "Currency areas and exchange-rate flexibility," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 105(1), pages 48-65, September.
    2. Velasco, A. & Chang, R., 1998. "The Asian Liquidity Crisis," Working Papers 98-27, C.V. Starr Center for Applied Economics, New York University.
    3. 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.
    4. 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.
    5. 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.
    6. Marco A. Espinosa-Vega & Steven Russell, 1996. "The Mexican economic crisis: alternative views," Economic Review, Federal Reserve Bank of Atlanta, issue Jan, pages 21-44.
    7. Roberto Chang, 2000. "Dollarization: a scorecard," Economic Review, Federal Reserve Bank of Atlanta, issue Q3, pages 1-12.
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    Cited by:

    1. Magdaléna DRASTICHOVÁ, 2009. "Current and future monetary cooperation with a focus on the possible monetary union of Gulf Cooperation Council," Proceedings of FIKUSZ '09,in: László Áron Kóczy (ed.), Proceedings of FIKUSZ '09, pages 57-69 Óbuda University, Keleti Faculty of Business and Management.
    2. Hochreiter, Eduard & Schmidt-Hebbel, Klaus & Winckler, Georg, 2002. "Monetary union: European lessons, Latin American prospects," The North American Journal of Economics and Finance, Elsevier, pages 297-321.
    3. Eduard Hochreiter & Anton Korinek & Pierre L. Siklos, 2003. "The potential consequences of alternative exchange rate regimes: A study of three candidate regions," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 8(4), pages 327-349.
    4. Liliane Karlinger, 2002. "The Impact of Common Currencies on Financial Markets: A Literature Review and Evidence from the Euro Area," Staff Working Papers 02-35, Bank of Canada.
    5. Aggarwal, Raj & Kyaw, NyoNyo A., 2005. "Equity market integration in the NAFTA region: Evidence from unit root and cointegration tests," International Review of Financial Analysis, Elsevier, vol. 14(4), pages 393-406.

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    Keywords

    Latin America ; Money ; Dollarization;

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