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Monetary Unions and Hard Pegs: Effects on Trade, Financial Development, and Stability


  • Alexander, Volbert
    (University of Giessen, Germany)

  • von Furstenberg, George M.
    (Indiana University, USA)

  • Melitz, Jacques
    (University of Strathclyde, Scotland, CREST, Paris, and CEPR)


Financial services with global reach are becoming ever more important in the conduct and organization of the trade and investment of nations, and currencies that lack international standing lose out in this business. The result of financial development has been destabilizing currency and portfolio substitution -- in favour of international currencies and against local ones. This book analyses formal approaches to overcoming monetary divisions within countries and within integrating regions, focusing on the consequences of monetary union for trade among union members and their financial development and stability. The authors discuss hard pegs such as those attempted by the currency board of Argentina, outright dollarization, such as in Ecuador, and multilateral monetary union, as in Europe, the least reversible form of monetary union and the most powerful elixir of financial integration and trade. The political classes and central banks in most countries have been reluctant to admit the market- and technology-driven forces of currency consolidation, much less yield to them. International financial institutions too are still in the habit of proffering advice about national monetary and exchange-rate policies on the assumption that getting rid of both is not even an option. Emerging-market countries, in particular, have to choose between retaining what independent monetary means they still have -- and can safely use in the presence of widespread liability dollarization and currency mismatches -- and formally replacing the domestic with an international currency to reduce exposure to debilitating financial crises. In concrete investigations of this choice, this volume shows that monetary union deserves a much more sympathetic hearing. Contributors to this volume - Editors: Volbert Alexander Jacques Melitz George von Furstenberg Contributors: Ignazio Angeloni is Deputy Director General for Research in the European Central Bank. Guillermo A. Calvo is the Chief Economist of the Inter-American Development Bank, Director of the Center for International Economics and Distinguished University Professor at the University of Maryland, Research Associate at the NBER, and President-elect of the International Economic Association. Benjamin J. Cohen is the Louis G. Lancaster Professor of International Political Economy at the University of California, Santa Barbara. Claudia Costa Storti is an economist at the Banco de Portugal. James W. Dean has been a professor of economics at Simon Fraser University in Vancouver, Canada since he completed his PhD at Harvard in 1973. Paul De Grauwe is professor of international economics at the University of Leuven, Belgium, and member of the Belgian parliament. Augusto P. de la Torre is Senior Regional Financial Sector Advisor for Latin America and the Caribbean at the World Bank. Gerald P. Dwyer Jr. is a Vice President at the Federal Reserve Bank of Atlanta, where he is in charge of the finance group in the Research Department. Edgar L. Feige is Professor of Economics Emeritus at the University of Wisconsin-Madison, Visiting Research Scholar at the Croatian National Bank and consultant to the International Monetary Fund. Eduardo Fernandez-Arias is the Chief Economist of the Regional Operations Department I of the Inter-American Development Bank (Argentina, Bolivia, Brazil, Chile, Paraguay and Uruguay). Hans Genberg is Professor of international economics at the Graduate Institute of International Studies in Geneva, Switzerland. Alberto Isgut is Assistant Professor of Economics at Wesleyan University. Alejandro Izquierdo is senior research economist at the Inter-American Development Bank. Charles M. Kahn is the Bailey Professor of Finance and Professor of Economics at the University of Illinois. Eduardo Levy Yeyati holds a Ph.D. in Economics from the University of Pennsylvania and is a Professor at the Business School of Universidad Torcuato Di Tella in Buenos Aires. James R. Lothian is Distinguished Professor of Finance in the Schools of Business of Fordham University and Editor of the Journal of International Money and Finance. Robert A. Mundell. The Royal Swedish Academy of Sciences awarded the 1999 Nobel Prize in Economic Sciences to Professor Mundell of Columbia University. Volker Nitsch is a Senior Economist at Bankgesellschaft Berlin, where he covers the European economy and capital markets. Ugo Panizza is an economist in the Research Department of the Inter-American Development Bank (IDB). Guillermo Perry is Chief Economist of the Latin American and Caribbean Region at the World Bank. Andrew K. Rose is B.T. Rocca Jr. Professor of International Business, Economic Analysis and Policy Group, Haas School of Business at the University of California, Berkeley, NBER Research Associate, and CEPR Research Fellow. Dominick Salvatore is Distinguished Professor of Economics and Department Chairperson at Fordham University in New York. Joao A. C. Santos is an economist in the Banking Studies Group of the Federal Reserve Bank of New York. Sergio L. Schmukler is a senior economist in the Macroeconomics and Growth team, Development Research Group, of the World Bank and an associate editor of the Journal of Development Economics. Luis Serven manages the regional research program of the World Bank's Latin American and Caribbean Region. Ernesto Stein is Senior Economist in the Research Department of the Inter-American Development Bank where he has been since 1994. Ernesto Talvi, a University of Chicago Ph. D., is Executive Director of CERES (Center for Economic and Social Policy Research), a highly respected public-policy research institution in Uruguay, and permanent advisor to the Chief Economist of the Inter-American Development Bank (IDB), Guillermo Calvo.

Suggested Citation

  • Alexander, Volbert & von Furstenberg, George M. & Melitz, Jacques (ed.), 2004. "Monetary Unions and Hard Pegs: Effects on Trade, Financial Development, and Stability," OUP Catalogue, Oxford University Press, number 9780199271405.
  • Handle: RePEc:oxp:obooks:9780199271405

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    Cited by:

    1. Monzur Hossain, 2008. "Currency Regime Choice: A Survey of Empirical Literature," AIUB Bus Econ Working Paper Series AIUB-BUS-ECON-2008-11, American International University-Bangladesh (AIUB), Office of Research and Publications (ORP), revised Apr 2008.
    2. Gern, Klaus-Jürgen & Hammermann, Felix & Schweickert, Rainer & Vinhas de Souza, Lúcio, 2004. "European monetary integration after EU enlargement," Kiel Discussion Papers 413, Kiel Institute for the World Economy (IfW).

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