Citation

Discussion Paper Details

Please find the details for DP590 in an easy to copy and paste format below:

Full Details   |   Bibliographic Reference

Full Details

Title: A Suggested Reformulation of the Theory of Optimal Currency Areas

Author(s): Jacques Melitz

Publication Date: October 1991

Keyword(s): EMU, Exchange Rate Regimes, Fiscal Federalism, Monetary Reform and Optimum Currency Area

Programme Area(s): International Macroeconomics

Abstract: In contrast to conventional analyses of monetary union between two particular countries or sets of countries, this paper treats the possible expansion of a given currency area as a continuous variable ranging from zero to one; zero if there is no expansion and one if all sources of imports and competition in trade are included in the union. The optimal order in which new members are admitted to the union then becomes one aspect of the problem. It is shown that by using this approach, it is easier to defend the argument that many nations are too small to form optimal currency areas. The demands upon the origin of the shocks, factor mobility, and political organization are smaller. The approach also fits better with the evidence.

For full details and related downloads, please visit: https://cepr.org/active/publications/discussion_papers/dp.php?dpno=590

Bibliographic Reference

Melitz, J. 1991. 'A Suggested Reformulation of the Theory of Optimal Currency Areas'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=590