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Currency Unions and International Integration

  • Rose, Andrew K
  • Engel, Charles

This paper characterizes the integration patterns of international currency unions (such as the CFA Franc Zone). We empirically explore different features of currency unions, and compare them to countries with sovereign monies by examining the criteria for Mundell's concept of an optimum currency area. We find that members of currency unions are more integrated than countries with their own currencies. For instance, we find that currency union members have more trade and less volatile real exchange rates than countries with their own monies; business cycles are more highly synchronized across currency union countries than across countries with sovereign monies.

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Article provided by Blackwell Publishing in its journal Journal of Money, Credit and Banking.

Volume (Year): 34 (2002)
Issue (Month): 4 (November)
Pages: 1067-89

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Handle: RePEc:mcb:jmoncb:v:34:y:2002:i:4:p:1067-89
Contact details of provider: Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-2879

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  1. Martin Feldstein & Charles Horioka, 1979. "Domestic Savings and International Capital Flows," NBER Working Papers 0310, National Bureau of Economic Research, Inc.
  2. Maurice Obstfeld & Kenneth Rogoff, 2001. "The Six Major Puzzles in International Macroeconomics: Is There a Common Cause?," NBER Chapters, in: NBER Macroeconomics Annual 2000, Volume 15, pages 339-412 National Bureau of Economic Research, Inc.
  3. Stephen Cecchetti & Nelson C. Mark & Robert Sonora, 1998. "Price Level Convergence Among United States Cities: Lessons for the European Central Bank," Working Papers 32, Oesterreichische Nationalbank (Austrian Central Bank).
  4. Kenneth Rogoff, 1996. "The Purchasing Power Parity Puzzle," Journal of Economic Literature, American Economic Association, vol. 34(2), pages 647-668, June.
  5. David C. Parsley & Shang-Jin Wei, 1996. "Convergence to the Law of One Price Without Trade Barriers or Currency Fluctuations," NBER Working Papers 5654, National Bureau of Economic Research, Inc.
  6. David K. Backus & Patrick J. Kehoe & Finn E. Kydland, 1987. "International real business cycles," Working Papers 426, Federal Reserve Bank of Minneapolis.
  7. Charles Engel & John H. Rogers, 1995. "How wide is the border?," International Finance Discussion Papers 498, Board of Governors of the Federal Reserve System (U.S.).
  8. Maurice Obstfeld & Kenneth S. Rogoff, 1996. "Foundations of International Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262150476, June.
  9. Engel, Charles & Hendrickson, Michael K. & Rogers, John H., 1997. "Intranational, Intracontinental, and Intraplanetary PPP," Journal of the Japanese and International Economies, Elsevier, vol. 11(4), pages 480-501, December.
  10. Charles Engel & Michael K. Hendrickson & John H. Rogers, 1997. "Intra-national, intra-continental, and intra-planetary PPP," International Finance Discussion Papers 589, Board of Governors of the Federal Reserve System (U.S.).
  11. Andrew K. Rose, 2000. "One money, one market: the effect of common currencies on trade," Economic Policy, CEPR;CES;MSH, vol. 15(30), pages 7-46, 04.
  12. Jeffrey A. Frankel & Andrew K. Rose, 1996. "The Endogeneity of the Optimum Currency Area Criteria," NBER Working Papers 5700, National Bureau of Economic Research, Inc.
  13. French, Kenneth R & Poterba, James M, 1991. "Investor Diversification and International Equity Markets," American Economic Review, American Economic Association, vol. 81(2), pages 222-26, May.
  14. Wacziarg, Romain & Imbs, Jean, 2000. "Stages of Diversification," Research Papers 1653, Stanford University, Graduate School of Business.
  15. Rogers, John H. & Jenkins, Michael, 1995. "Haircuts or hysteresis? Sources of movements in real exchange rates," Journal of International Economics, Elsevier, vol. 38(3-4), pages 339-360, May.
  16. Todd E. Clark & Eric van Wincoop, 1999. "Borders and business cycles," Staff Reports 91, Federal Reserve Bank of New York.
  17. Glenn D. Rudebusch, 1992. "The uncertain unit root in real GNP," Finance and Economics Discussion Series 193, Board of Governors of the Federal Reserve System (U.S.).
  18. Robert C. Feenstra & Robert E. Lipsey & Harry P. Bowen, 1997. "World Trade Flows, 1970-1992, with Production and Tariff Data," NBER Working Papers 5910, National Bureau of Economic Research, Inc.
  19. McCallum, John, 1995. "National Borders Matter: Canada-U.S. Regional Trade Patterns," American Economic Review, American Economic Association, vol. 85(3), pages 615-23, June.
  20. Bacchetta, Philippe & Rose, Andrew K. & van Wincoop, Eric, 2001. "Intranational Economics and International Economics," Journal of International Economics, Elsevier, vol. 55(1), pages 1-1, October.
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