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|
|Date of revision:|
|Contact details of provider:|| Postal: University of California at Berkeley, Berkeley, CA USA|
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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Smaghi, L.B. & Area, C., 1993. "Rating the EC as an Optimal Currency Area," Papers 187, Banca Italia - Servizio di Studi.
- Bayoumi, Tamim, 1994.
"A Formal Model of Optimum Currency Areas,"
CEPR Discussion Papers
968, C.E.P.R. Discussion Papers.
- 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, 1998. "The Endogeneity of the Optimum Currency Area Criteria," Economic Journal, Royal Economic Society, vol. 108(449), pages 1009-25, July.
- 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.
- Paul Grauwe, 1996. "The economics of convergence: Towards monetary union in Europe," Review of World Economics (Weltwirtschaftliches Archiv), Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 132(1), pages 1-27, March.
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