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How Many Monies? A Genetic Approach to Finding Optimum Currency Areas

Listed author(s):
  • Atish R. Ghosh
  • Holger C. Wolf

Recent moves towards greater monetary integration in Western Europe - and disintegration in Eastern Europe and the former Soviet Union - have rekindled interest in the theoretical and empirical aspects of optimal currency areas (OCA). In this paper, we examine the marginal benefit of increasing the number of currency unions within a given geographical area. We look at six regions; the United States, Europe, the G7, the CFA zone, the FSU and the world at large. Our results suggest that (i) contiguous monetary unions are typically dominated by non-contiguous unions; (ii) neither Europe nor the United States form an optimum currency area, for both regions the costs of adopting a single currency exceeds estimates of the transaction cost savings; (iii) Germany and the United States will almost never find it to their (economic) advantage to join monetary unions.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 4805.

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Date of creation: Jul 1994
Publication status: Published as "On the Mark(s): Optimum Currency Areas in Germany", EM, Vol. 13, no. 4 (October 1996): 561-573.
Handle: RePEc:nbr:nberwo:4805
Note: IFM
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  1. Robert P Flood & Joshua Aizenman, 1992. "A Theory of Optimum Currency Areas; Revisited," IMF Working Papers 92/39, International Monetary Fund.
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