DP1926 Trade and the Number of Optimum Currency Areas in the World

Author(s): Michael J Artis, Marion Kohler, Jacques Melitz
Publication Date: July 1998
Keyword(s): Business Cycles, Optimal Currency Areas, Trade
JEL(s): F02, F15, F40
Programme Areas: International Macroeconomics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=1926

This paper employs worldwide data on output and bilateral trade in order to identify optimum currency areas (OCA?s) on a global basis. By retaining only two of the many criteria that have been mentioned in the literature on OCA?s, it has been possible to use computer programming to do the identification. Based on the first of the two criteria, relating to trade, some large continental OCA?s can be discerned in the world. Adding the second criterion, which concerns symmetry-of-output-shocks, whittles down the size of the OCA?s. Nevertheless, some significant examples remain in the Americas, Europe and Asia, of which the European and the Asiatic are the most noteworthy.