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The theory of monetary integration

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  • George Tavlas

Abstract

Research dealing with the theory of monetary integration is reviewed. After briefly describing the genesis of the theory as foreshadowed in work on optimum currency areas, the paper assesses two main areas of recent research — the analysis of the effects of disturbances on participating countries in a currency area, and reputational considerations. With regard to disturbances, the paper finds that it is difficult to draw clear-out inferences from theoretical work on the optimal degree of exchange rate management and from empirical studies on the effects of shocks. Work on reputational issues is found to suffer from conceptual problems and has generated empirical results that have not supported the hypothesis that participation in a currency area is a sufficient condition to enhance reputation. Copyright Kluwer Academic Publishers 1994

Suggested Citation

  • George Tavlas, 1994. "The theory of monetary integration," Open Economies Review, Springer, vol. 5(2), pages 211-230, March.
  • Handle: RePEc:kap:openec:v:5:y:1994:i:2:p:211-230
    DOI: 10.1007/BF01000489
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