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Optimum Currency Areas within the US and Canada a Data Analysis Approach

Author

Listed:
  • Efthimia Chrysanthidou

    (Democritus University of Thrace, Department of International Economic Relations and Development)

  • Periklis Gogas

    (Democritus University of Thrace, Department of International Economic Relations and Development)

  • Theophilos Papadimitriou

    (Democritus University of Thrace, Department of International Economic Relations and Development)

Abstract

Over the last few decades Robert Mundell’s theory (1963) of Optimum Currency Areas (OCA) has attracted significant attention between researchers and policy makers especially after the formation of the European Monetary Union and the debate over whether the eurozone countries actually consist an OCA. In this paper, we take this debate to the area that was originally the subject of Mundell’s motivation: the US and Canada. We employ the methodology of Correspondence Analysis and Hierarchical Cluster Analysis, in a sample of macroeconomic data from the fifty US states and ten Canadian provinces for 2009 in an effort to investigate whether the current currency split between north (Canada) and south (the US) is an OCA or possibly another split may be more appropriate. Our results show that three OCAs are identified within US states and Canadian provinces: one that includes regions of eastern US and Canada, one that includes regions of central-eastern and eastern US and Canada and finally one with regions of western US and Canada.

Suggested Citation

  • Efthimia Chrysanthidou & Periklis Gogas & Theophilos Papadimitriou, 2012. "Optimum Currency Areas within the US and Canada a Data Analysis Approach," DUTH Research Papers in Economics 4-2012, Democritus University of Thrace, Department of Economics.
    • Handle: RePEc:ris:duthrp:2012_004
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    References listed on IDEAS

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    1. Ronald McKinnon, 2000. "Mundell, the Euro, and Optimum Currency Areas," Working Papers 00009, Stanford University, Department of Economics.
    2. Ricci, Luca Antonio, 2008. "A Model of an Optimum Currency Area," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy, vol. 2, pages 1-31.
    3. Dimitrios Sideris, 2011. "Optimum currency areas, structural changes and the endogeneity of the OCA criteria: evidence from six new EU member states," Applied Financial Economics, Taylor & Francis Journals, vol. 21(4), pages 195-206.
    4. Barry Eichengreen, 1992. "Is Europe an Optimum Currency Area?," Palgrave Macmillan Books, in: Silvio Borner & Herbert Grubel (ed.), The European Community after 1992, chapter 8, pages 138-161, Palgrave Macmillan.
    5. Stefan Eichler & Alexander Karmann, 2011. "Optimum Currency Areas in Emerging Market Regions: Evidence Based on the Symmetry of Economic Shocks," Open Economies Review, Springer, vol. 22(5), pages 935-954, November.
    6. Michael A. Kouparitsas, 2001. "Is the United States an optimum currency area? an empirical analysis of regional business cycles," Working Paper Series WP-01-22, Federal Reserve Bank of Chicago.
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    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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