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Currency Unions in Prospect and Retrospect

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  • J. M. C. Santos Silva
  • Silvana Tenreyro

Abstract

We critically review the recent literature on currency unions, and discuss the methodological challenges posed by the empirical assessment of their costs and benefits. In the process, we provide evidence on the economic effects of the euro. In particular, and in contrast with estimates of the trade effect of other currency unions, we find that the impact of the euro on trade has been close to zero. After reviewing the costs and benefits, we conclude with some open questions on normative and positive aspects of the theory of currency unions, emphasizing the need for a unified welfare-based framework to weigh their costs and gains.

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  • J. M. C. Santos Silva & Silvana Tenreyro, 2010. "Currency Unions in Prospect and Retrospect," CEP Discussion Papers dp0986, Centre for Economic Performance, LSE.
    • Handle: RePEc:cep:cepdps:dp0986
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    More about this item

    Keywords

    Currency union; Integration; Exchange Rage; Trade;
    All these keywords.

    JEL classification:

    • F00 - International Economics - - General - - - General
    • F02 - International Economics - - General - - - International Economic Order and Integration
    • F15 - International Economics - - Trade - - - Economic Integration
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission

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