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Endogenous Optimal Currency Areas
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Book Synopsis Endogenous Optimal Currency Areas by : Fabrizio Carmignani
Download or read book Endogenous Optimal Currency Areas written by Fabrizio Carmignani and published by . This book was released on 2009 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: "The Central African Economic and Monetary Community (CAEMC) has been a monetary union for several decades now. According to the hypothesis of endogenous optimal currency areas (OCA), the degree of business cycles synchronization across its member states should be significantly higher today than 40 years ago. Investigating the empirical validity of this hypothesis is important in the context of the African economic integration process. If currency unions are endogenous, then quick monetary integration is a worthwhile option that can be used to accelerate economic integration. On the contrary, if currency unions were not endogenous, then a speedy monetary unification would not benefit countries collectively and might therefore jeopardize the whole regional integration initiative. This paper assesses the endogeneity of CAEMC as an OCA by examining the cross-country synchronization of business cycles along three statistical dimensions: bilateral correlation of cyclical co-movements, similarity of cycle statistical properties, and concordance of cyclical phases. Its innovative contribution is threefold. First, it provides a direct test of the endogeneity hypothesis on a specific currency union. Most previous studies instead rely on panel estimates of global datasets. Second, it expands the existing literature on the monetary geography of Africa. Indeed, there are several papers that study whether or not specific African regions are OCA. However, these papers generally look at the ex-ante conditions for optimality, leaving the issue of endogeneity of OCA criteria unexplored. The paper fills in this gap. Third, the paper presents a business cycle chronology for the six CAEMC members, thus opening up new opportunities to understand the cyclical characterization of economic systems and policies in the region"--Abstract.
Book Synopsis A Formal Model of Optimum Currency Areas by : Mr.Tamim Bayoumi
Download or read book A Formal Model of Optimum Currency Areas written by Mr.Tamim Bayoumi and published by International Monetary Fund. This book was released on 1994-04-01 with total page 22 pages. Available in PDF, EPUB and Kindle. Book excerpt: A model of optimum currency areas is presented using a general equilibrium model with regionally differentiated goods. The choice of a currency union depends upon the size of the underlying disturbances, the correlation between these disturbances, the costs of transactions across currencies, factor mobility across regions, and the interrelationships between demand for different goods. It is found that, while a currency union can raise the welfare of the regions within the union, it unambiguously lowers welfare for those outside the union.
Book Synopsis Self-validating Optimum Currency Areas by : Giancarlo Corsetti
Download or read book Self-validating Optimum Currency Areas written by Giancarlo Corsetti and published by . This book was released on 2002 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper we show that a currency area can be a self-validating optimal policy regime, even when monetary unification does not foster real economic integration and intra-industry trade. This is because profit-maximizing producers in a currency area adopt endogenous pricing strategies that make exchange rate fluctuations highly costly in welfare terms. In our model exporters choose the degree of exchange rate pass-through onto export prices given monetary policy rules, and monetary authorities choose optimal policy rules taking firms' pass-through as given. We show that there exist two equilibria, which define two self-validating currency regimes. In the first, firms preset prices in domestic currency only, and let foreign-currency prices to be determined by the law of one price. Optimal policy rules then target the domestic output gap and floating exchange rates support the flex-price allocation. In the second equilibrium firms optimally preset prices in local currency, and a monetary union is the optimal policy choice for all countries. Although business cycles are more synchronized with a common currency, flexible exchange rates are superior in terms of welfare.
Book Synopsis A Model of an Optimum Currency Area by : Mr.Luca Antonio Ricci
Download or read book A Model of an Optimum Currency Area written by Mr.Luca Antonio Ricci and published by International Monetary Fund. This book was released on 1997-06-01 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper investigates the circumstances under which it is beneficial to participate in a currency area. A two-country monetary model of trade with nominal rigidities encompasses the real and monetary arguments suggested by the optimum currency area literature: correlation of real shocks, international factor mobility, fiscal adjustment, openness, difference in national inflationary biases, correlation of monetary shocks, and benefits of a single currency. The effect of openness on the net benefits is ambiguous, contrary to the usual argument that more open economies are better candidates for a currency area. Countries do not necessarily agree on whether a given currency union should be created.
Book Synopsis The Endogeneity of Optimum Currency Area Criteria, Intraindustry Trade and EMU Enlargement by :
Download or read book The Endogeneity of Optimum Currency Area Criteria, Intraindustry Trade and EMU Enlargement written by and published by . This book was released on 2001 with total page 29 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Optimal Currency Areas and the Euro, Volume II by : Johannes Kabderian Dreyer
Download or read book Optimal Currency Areas and the Euro, Volume II written by Johannes Kabderian Dreyer and published by Springer Nature. This book was released on 2023-09-24 with total page 131 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book is the second of three volumes that uses the theory of Optimal Currency Areas (OCAs) and applied econometric techniques to provide the reader with a compact analysis of the Euro area, its evolution and future perspectives. Each volume of the series is dedicated to one of the three critical criteria for an OCA: 1) business cycle synchronization, 2) factor mobility and 3) the existence of a risk sharing system. This second volume deals with the criterion of factor mobility. The authors investigate and discuss whether there are signs of labor and capital mobility that have helped dampen economic shocks among the regions of the Euro during its short history. The book is of interest to a wide range of researchers in financial economics, macroeconomics and economic policy.
Book Synopsis Optimal Currency Areas by : Robert Lafrance
Download or read book Optimal Currency Areas written by Robert Lafrance and published by . This book was released on 1999 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt: Surveys the recent literature on optimal currency areas (OCAs). Topics that are covered include theoretical developments in the context of general-equilibrium models and empirical work on shocks asymmetry and adjustment mechanisms.
Book Synopsis The endogeneity of the optimum currency area criteria, intraindustry trade, and EMU enlargement by : Jarko Fidrmuc
Download or read book The endogeneity of the optimum currency area criteria, intraindustry trade, and EMU enlargement written by Jarko Fidrmuc and published by . This book was released on 2001 with total page 29 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper tests an endogeneity hypothesis of optimum currency area (OCA) criteria (Frankel and Rose, 1998) on a cross-section of OECD countries between 1990 and 1999. The findings indicate that convergence of business cycles relates to intra-industry trade, but has no direct relation between business cycles and bilateral trade intensity. As far as intra-industry trade is positively correlated with trade intensities, this result confirms the OCA endogeneity hypothesis. The endogeneity of OCA linkage criteria implies extensive business cycle harmonization between CEECs and EU countries in the medium term. Published in: Contemporary Economic Policy vol. 22, no 1 (2004) pp. 1-12, ISSN 1074-3529.
Book Synopsis The Endogeneity of the Optimum Currency Area Criteria by : Jeffrey A. Frankel
Download or read book The Endogeneity of the Optimum Currency Area Criteria written by Jeffrey A. Frankel and published by . This book was released on 1996 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt: A country's suitability for entry into a currency union depends on a number of economic conditions. These include, inter alia, the intensity of trade with other potential members of the currency union, and the extent to which domestic business cycles are correlated with those of the other countries. But international trade patterns and international business cycle correlations are endogenous. This paper develops and investigates the relationship between the two phenomena. Using thirty years of data for twenty industrialized countries, we uncover a strong and striking empirical finding: countries with closer trade links tend to have more tightly correlated business cycles. It follows that countries are more likely to satisfy the criteria for entry into a currency union after taking steps toward economic integration than before.
Book Synopsis A Theory of Optimum Currency Areas by : Robert A. Mundell
Download or read book A Theory of Optimum Currency Areas written by Robert A. Mundell and published by . This book was released on 1961 with total page 24 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Rethinking Optimum Currency Area Theory by : José Garcia
Download or read book Rethinking Optimum Currency Area Theory written by José Garcia and published by . This book was released on 2018 with total page 29 pages. Available in PDF, EPUB and Kindle. Book excerpt: This work aims to assess whether the hypothesis of endogenous synchronisation of shocks is verified in the European Economic and Monetary Union (EMU). A state-space model, which yields time-varying coefficients, is estimated with structural demand and supply shocks to several European economies and those of Germany. The goals is to obtain dynamic measures of correlation, which can help understand to what extent have structural shocks to European economies become more or less synchronised with Germany's throughout the EMU experience. Evidence shows that demand shocks have become increasingly synchronised, which corroborates the hypothesis of endogeneity. However, this phenomenon does not seem to be restricted only to EMU members. Furthermore, results prove that this increasing synchronisation occurred mainly in peripheral countries. For supply shocks conclusions are not as clear. Nevertheless, results do seem to point to the fact the countries outside the EMU have not become more structurally similar to Germany.
Book Synopsis Business Cycles and Trade. An Analysis of the Endogenous Optimum Currency Area Criteria in Europe by : Adam Peter Bointon
Download or read book Business Cycles and Trade. An Analysis of the Endogenous Optimum Currency Area Criteria in Europe written by Adam Peter Bointon and published by . This book was released on 2003 with total page 90 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis How Many Monies? by : Atish R. Ghosh
Download or read book How Many Monies? written by Atish R. Ghosh and published by . This book was released on 1994 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
Book Synopsis Exchange Rate Regimes and Location by : Mr.Luca Antonio Ricci
Download or read book Exchange Rate Regimes and Location written by Mr.Luca Antonio Ricci and published by International Monetary Fund. This book was released on 1997-06-01 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper investigates the effects of fixed versus flexible exchange rates on firms’ location choices and on countries’ specialization patterns. In a two-country, two-differentiated-goods monetary model, demand, supply, and monetary (as well as exchange rate) shocks arise after wages are set and prices are optimally chosen. The paper finds that countries are more specialized under flexible than fixed rates, and that the pattern of specialization is not uniquely defined by trade models but depends also on the exchange rate regime. The adoption of fixed exchange rates endogenously increases the desirability of this currency area by reducing the shock asymmetry. These results also shed light on the effects of exchange rate variability on trade.
Book Synopsis Are Optimum Currency Area (OCA) Theory Criteria Endogenous to Regime Change? by : Victor Chukwuemeka
Download or read book Are Optimum Currency Area (OCA) Theory Criteria Endogenous to Regime Change? written by Victor Chukwuemeka and published by . This book was released on 2013 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis An Optimum-Currency-Area Odyssey by : G. S. Tavlas
Download or read book An Optimum-Currency-Area Odyssey written by G. S. Tavlas and published by . This book was released on 2022 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: The theory of optimum-currency-areas was conceived and developed in three highly influential papers, written by Mundell (1961), McKinnon (1963) and Kenen (1969). Those authors identified characteristics that potential members of a monetary union should ideally possess in order to make it feasible to surrender a nationally- tailored monetary policy and the adjustment of an exchange rate of a national currency. We trace the development of optimum currency- area theory, which, after a flurry of research into the subject in the 1960s, was relegated to intellectual purgatory for about 20 years. We then discuss factors that led to a renewed interest into the subject, beginning in the early 1990s. Milton Friedman plays a pivotal role in our narrative; Friedman's work on monetary integration in the early 1950s presaged subsequent optimum-currency-area contributions; Mundell's classic formulation of an optimal currency area was aimed, in part, at refuting Friedman's ''strong'' case for floating exchange rates; and Friedman's work on the role of monetary policy had the effect of helping to revive interest in optimum-currency-area analysis. The paper concludes with a discussion of recent analytical work, using New Keynesian models, which has the promise of fulfilling the unfinished agenda set-out by the original contributors to the optimum-currency-area literature, that is, providing a consistent framework in which a country's characteristics can be used to determine its optimal exchange-rate regime.
Book Synopsis The Shrinking Endogeneity of Optimum Currency Areas Criteria by :
Download or read book The Shrinking Endogeneity of Optimum Currency Areas Criteria written by and published by . This book was released on 2007 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
