Ever Closer to Heaven? An Optimum-Currency-Area Index for European Countries
In this paper we develop a procedure for applying the core implications of the theory of optimum currency areas to cross-country data. We demonstrate that these implications find strong empirical support. The relationship between the characteristics of countries to which OCA theory points and the observed behavior of exchange rates seems sufficiently stable and robust to support simple forecasting. Extrapolating the independent variables, we therefore use our exchange rate equations to predict which countries will be best able to support stable exchange rates in the future -- equivalently, which are likely to be best prepared to be among the founding members of Europe's monetary union.
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| Date of creation: | 01 Dec 1996 |
| Handle: | RePEc:cdl:econwp:qt5th597st |
| Contact details of provider: | Postal: F502 Haas, Berkeley CA 94720-1922 Phone: (510) 642-1922 Fax: (510) 642-5018 Web page: http://www.escholarship.org/repec/iber_econ/ Email: More information through EDIRC
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References listed on IDEAS
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- Frankel, Jeffrey A & Rose, Andrew K, 1998.
"The Endogeneity of the Optimum Currency Area Criteria,"
Economic Journal,
Royal Economic Society, vol. 108(449), pages 1009-1025, July.
- 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.
- Frankel, Jeffrey A & Rose, Andrew K, 1996. "The Endogeneity of the Optimum Currency Area Criteria," CEPR Discussion Papers 1473, C.E.P.R. Discussion Papers.
- Tamim Bayoumi, 1994. "A Formal Model of Optimum Currency Areas," IMF Staff Papers, Palgrave Macmillan, vol. 41(4), pages 537-554, December.
- Bayoumi, Tamim, 1994. "A Formal Model of Optimum Currency Areas," CEPR Discussion Papers 968, C.E.P.R. Discussion Papers.
- Tamim Bayoumi, 1994. "A Formal Model of Optimum Currency Areas," IMF Working Papers 94/42, International Monetary Fund.
- Paul Grauwe, 1996. "The economics of convergence: Towards monetary union in Europe," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 132(1), pages 1-27, March.
- Smaghi, L.B. & Area, C., 1993. "Rating the EC as an Optimal Currency Area," Papers 187, Banca Italia - Servizio di Studi. Full references (including those not matched with items on IDEAS)
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