IDEAS home Printed from https://ideas.repec.org/p/mmf/mmfc06/19.html
   My bibliography  Save this paper

From Currency Unions to a World Currency: A Possibility?

Author

Listed:
  • Davide Furceri

    (University of Illinois at Chicago)

Abstract

The purpose of this paper is to analyze the main macroeconomic determinants of benefits and costs by undertaking processes of monetary integration, and investigate the possibility that currency unions could be lead to the creation of a global currency in the future. In particular, we will consider two main costs and benefits predicted by the theory of Optimum Currency Areas: (i) the business-cycle correlation between the candidate’s economy and that of the currency zone as a whole, and (ii) the candidate economy’s inflationary bias. Using this methodology, the results of the paper provide empirical evidence of the existence of several optimal currency areas in the world. Moreover, the creation of a world common currency area is not as unrealistic as it might seem at first sight.

Suggested Citation

  • Davide Furceri, 2007. "From Currency Unions to a World Currency: A Possibility?," Money Macro and Finance (MMF) Research Group Conference 2006 19, Money Macro and Finance Research Group.
    • Handle: RePEc:mmf:mmfc06:19
    as

    Download full text from publisher

    File URL: http://repec.org/mmf2006/up.4898.1142305096.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. 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.
    2. Marianne Baxter & Robert G. King, 1999. "Measuring Business Cycles: Approximate Band-Pass Filters For Economic Time Series," The Review of Economics and Statistics, MIT Press, vol. 81(4), pages 575-593, November.
    3. Andrew K. Rose, 1999. "One Money, One Market: Estimating the Effect of Common Currencies on Trade," NBER Working Papers 7432, National Bureau of Economic Research, Inc.
    4. Rudi Dornbusch, 2001. "Fewer Monies, Better Monies," American Economic Review, American Economic Association, vol. 91(2), pages 238-242, May.
    5. Furceri, Davide & Karras, Georgios, 2006. "Are the new EU members ready for the EURO?: A comparison of costs and benefits," Journal of Policy Modeling, Elsevier, vol. 28(1), pages 25-38, January.
    6. Hodrick, Robert J & Prescott, Edward C, 1997. "Postwar U.S. Business Cycles: An Empirical Investigation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 29(1), pages 1-16, February.
    7. Robert Barro & Silvana Tenreyro, 2007. "Economic Effects Of Currency Unions," Economic Inquiry, Western Economic Association International, vol. 45(1), pages 1-23, January.
    8. Rose, Andrew K & Engel, Charles, 2002. "Currency Unions and International Integration," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 34(4), pages 1067-1089, November.
    9. Alberto Alesina & Robert J. Barro & Silvana Tenreyro, 2003. "Optimal Currency Areas," NBER Chapters, in: NBER Macroeconomics Annual 2002, Volume 17, pages 301-356, National Bureau of Economic Research, Inc.
    10. Karras, Georgios, 2002. "Costs and Benefits of Dollarization: Evidence from North, Central, and South America," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 17, pages 502-516.
    11. D. Furceri & G. Karras, 2008. "Business-cycle synchronization in the EMU," Applied Economics, Taylor & Francis Journals, vol. 40(12), pages 1491-1501.
    12. Andrew K. Rose & Eric van Wincoop, 2001. "National Money as a Barrier to International Trade: The Real Case for Currency Union," American Economic Review, American Economic Association, vol. 91(2), pages 386-390, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Kamleshan Pillay & Jorge E. Viñuales, 2016. "“Monetary” rules for a linked system of offset credits," International Environmental Agreements: Politics, Law and Economics, Springer, vol. 16(6), pages 933-951, December.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. António Afonso & Davide Furceri, 2007. "Business Cycle Synchronization and Insurance Mechanisms in the EU," Working Papers Department of Economics 2007/26, ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa.
    2. Afonso, António & Furceri, Davide, 2008. "EMU enlargement, stabilization costs and insurance mechanisms," Journal of International Money and Finance, Elsevier, vol. 27(2), pages 169-187, March.
    3. Davide Furceri & Georgios Karras, 2008. "Is the Middle East an Optimum Currency Area? A Comparison of Costs and Benefits," Open Economies Review, Springer, vol. 19(4), pages 479-491, September.
    4. Alberto Alesina & Robert J. Barro & Silvana Tenreyro, 2003. "Optimal Currency Areas," NBER Chapters, in: NBER Macroeconomics Annual 2002, Volume 17, pages 301-356, National Bureau of Economic Research, Inc.
    5. Sebastian Edwards & I. Igal Magendzo, 2003. "Dollarization and economic performance: What do we really know?," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 8(4), pages 351-363.
    6. António Afonso & Davide Furceri, 2009. "Sectoral Business Cycle Synchronization in the European Union," Economics Bulletin, AccessEcon, vol. 29(4), pages 2996-3014.
    7. Stavros Degiannakis & David Duffy & George Filis, 2014. "Business Cycle Synchronization in EU: A Time-Varying Approach," Scottish Journal of Political Economy, Scottish Economic Society, vol. 61(4), pages 348-370, September.
    8. Tenreyro, Silvana, 2007. "On the trade impact of nominal exchange rate volatility," Journal of Development Economics, Elsevier, vol. 82(2), pages 485-508, March.
    9. Pomfret, Richard, 2005. "Sequencing trade and monetary integration: issues and application to Asia," Journal of Asian Economics, Elsevier, vol. 16(1), pages 105-124, February.
    10. Degiannakis, Stavros & Duffy, David & Filis, George & Livada, Alexandra, 2016. "Business cycle synchronisation in EMU: Can fiscal policy bring member-countries closer?," Economic Modelling, Elsevier, vol. 52(PB), pages 551-563.
    11. Kapounek, Svatopluk & Kučerová, Zuzana, 2019. "Historical decoupling in the EU: Evidence from time-frequency analysis," International Review of Economics & Finance, Elsevier, vol. 60(C), pages 265-280.
    12. Gächter, Martin & Riedl, Aleksandra, 2014. "One money, one cycle? The EMU experience," Journal of Macroeconomics, Elsevier, vol. 42(C), pages 141-155.
    13. Sergey Drobyshevsky & Dmitri Polevoy, 2004. "Problems Associated with Creation of a Single Currency Zone in the CIS Countries," Research Paper Series, Gaidar Institute for Economic Policy, issue 80P, pages 110-110.
    14. Joao Loureiro & Manuel M.f. Martins & Ana Paula Ribeiro, 2010. "Cape Verde: The Case For Euroisation," South African Journal of Economics, Economic Society of South Africa, vol. 78(3), pages 248-268, September.
    15. Karras, Georgios, 2003. "How homogenizing are monetary unions?: Evidence from the U.S. states," The North American Journal of Economics and Finance, Elsevier, vol. 14(3), pages 381-397, December.
    16. Sebastian Edwards, 2006. "Monetary unions, external shocks and economic performance: A Latin American perspective," International Economics and Economic Policy, Springer, vol. 3(3), pages 225-247, December.
    17. Konstantakopoulou, Ioanna & Tsionas, Efthymios G., 2014. "Half a century of empirical evidence of business cycles in OECD countries," Journal of Policy Modeling, Elsevier, vol. 36(2), pages 389-409.
    18. George S. Tavlas, 2009. "The Benefits And Costs Of Monetary Union In Southern Africa: A Critical Survey Of The Literature," Journal of Economic Surveys, Wiley Blackwell, vol. 23(1), pages 1-43, February.
    19. Styliani Christodoulopoulou, 2014. "The effect of currency unions on business cycle correlations: the EMU case," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 41(2), pages 177-222, May.
    20. Degiannakis, Stavros & Duffy, David & Filis, George, 2013. "Time-varying Business Cycles Synchronisation in Europe," MPRA Paper 52925, University Library of Munich, Germany.

    More about this item

    Keywords

    Currency Unions; World Currency;

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:mmf:mmfc06:19. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Christopher F. Baum (email available below). General contact details of provider: http://www.essex.ac.uk/afm/mmf/index.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.