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Monetary Unions and Hard Pegs: Effects on Trade, Financial Development and Stability

Financial services with global reach are becoming ever more important in the conduct and organization of the trade and investment of nations, and currencies that lack international standing lose out in this business. The result of financial development has been destabilizing currency and portfolio substitution -- in favour of international currencies and against local ones.
This book analyses formal approaches to overcoming monetary divisions within countries and within integrating regions, focusing on the consequences of monetary union for trade among union members and their financial development and stability. The authors discuss hard pegs such as those attempted by the currency board of Argentina, outright dollarization, such as in Ecuador, and multilateral monetary union, as in Europe, the least reversible form of monetary union and the most powerful elixir of financial integration and trade.

The political classes and central banks in most countries have been reluctant to admit the market- and technology-driven forces of currency consolidation, much less yield to them. International financial institutions too are still in the habit of proffering advice about national monetary and exchange-rate policies on the assumption that getting rid of both is not even an option. Emerging-market countries, in particular, have to choose between retaining what independent monetary means they still have -- and can safely use in the presence of widespread liability dollarization and currency mismatches -- and formally replacing the domestic with an international currency to reduce exposure to debilitating financial crises. In concrete investigations of this choice, this volume shows that monetary union deserves a much more sympathetic hearing.

Citation

Melitz, J, G von Furstenberg and V Alexander (eds) (2004), ‘Monetary Unions and Hard Pegs: Effects on Trade, Financial Development and Stability‘, CEPR Press, Paris & London. https://cepr.org/publications/books-and-reports/monetary-unions-and-hard-pegs-effects-trade-financial-development

Citation

Melitz, J, G von Furstenberg and V Alexander, ‘Editorial Introduction to the Volume and Detailed Introductions to Each of its Four Parts‘, in Melitz, J, G von Furstenberg and V Alexander (eds), Monetary Unions and Hard Pegs: Effects on Trade, Financial Development and Stability, CEPR Press, Paris & London. https://cepr.org/publications/books-and-reports/monetary-unions-and-hard-pegs-effects-trade-financial-development

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Salvatore, D, ‘Euroization, Dollarization, and the International Monetary System‘, in Melitz, J, G von Furstenberg and V Alexander (eds), Monetary Unions and Hard Pegs: Effects on Trade, Financial Development and Stability, CEPR Press, Paris & London. https://cepr.org/publications/books-and-reports/monetary-unions-and-hard-pegs-effects-trade-financial-development

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Angeloni, I, ‘Unilateral and Multilateral Currency Unions: Thoughts from and EMU Perspective‘, in Melitz, J, G von Furstenberg and V Alexander (eds), Monetary Unions and Hard Pegs: Effects on Trade, Financial Development and Stability, CEPR Press, Paris & London. https://cepr.org/publications/books-and-reports/monetary-unions-and-hard-pegs-effects-trade-financial-development

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Lothian, J and G Dwyer Jr, ‘International Money and Common Currencies in Historical Perspective‘, in Melitz, J, G von Furstenberg and V Alexander (eds), Monetary Unions and Hard Pegs: Effects on Trade, Financial Development and Stability, CEPR Press, Paris & London. https://cepr.org/publications/books-and-reports/monetary-unions-and-hard-pegs-effects-trade-financial-development

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Melitz, J, ‘Geography, Trade, and Currency Union‘, in Melitz, J, G von Furstenberg and V Alexander (eds), Monetary Unions and Hard Pegs: Effects on Trade, Financial Development and Stability, CEPR Press, Paris & London. https://cepr.org/publications/books-and-reports/monetary-unions-and-hard-pegs-effects-trade-financial-development

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Nitsch, V, ‘Comparing Apples and Oranges: The Effect of Multilateral Currency Unions on Trade‘, in Melitz, J, G von Furstenberg and V Alexander (eds), Monetary Unions and Hard Pegs: Effects on Trade, Financial Development and Stability, CEPR Press, Paris & London. https://cepr.org/publications/books-and-reports/monetary-unions-and-hard-pegs-effects-trade-financial-development

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Rose, A, ‘The Effect of Common Currencies on International Trade: A Meta-Analysis‘, in Melitz, J, G von Furstenberg and V Alexander (eds), Monetary Unions and Hard Pegs: Effects on Trade, Financial Development and Stability, CEPR Press, Paris & London. https://cepr.org/publications/books-and-reports/monetary-unions-and-hard-pegs-effects-trade-financial-development

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Isgut, A, ‘Common Currencies and Market Integration Across Cities: How Stong is the Link?‘, in Melitz, J, G von Furstenberg and V Alexander (eds), Monetary Unions and Hard Pegs: Effects on Trade, Financial Development and Stability, CEPR Press, Paris & London. https://cepr.org/publications/books-and-reports/monetary-unions-and-hard-pegs-effects-trade-financial-development

Citation

Isgut, A, ‘Common Currencies and Market Integration Across Cities: How Stong is the Link?‘, in Melitz, J, G von Furstenberg and V Alexander (eds), Monetary Unions and Hard Pegs: Effects on Trade, Financial Development and Stability, CEPR Press, Paris & London. https://cepr.org/publications/books-and-reports/monetary-unions-and-hard-pegs-effects-trade-financial-development

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Panizza, U, E Stein and E Fernandez-Arias, ‘Trade Agreements, Exchange Rate Disagreements‘, in Melitz, J, G von Furstenberg and V Alexander (eds), Monetary Unions and Hard Pegs: Effects on Trade, Financial Development and Stability, CEPR Press, Paris & London. https://cepr.org/publications/books-and-reports/monetary-unions-and-hard-pegs-effects-trade-financial-development

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Levy Yeyati, E, S Schmukler and A De la Torre, ‘Sudden Stops, the Real Exchange Rate, and Fiscal Sustainability: Argentina's Lessons‘, in Melitz, J, G von Furstenberg and V Alexander (eds), Monetary Unions and Hard Pegs: Effects on Trade, Financial Development and Stability, CEPR Press, Paris & London. https://cepr.org/publications/books-and-reports/monetary-unions-and-hard-pegs-effects-trade-financial-development

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Servén, L and G Perry, ‘The Anatomy of a Multiple Crisis: Why was Argentina Special and What Can We Learn from It?‘, in Melitz, J, G von Furstenberg and V Alexander (eds), Monetary Unions and Hard Pegs: Effects on Trade, Financial Development and Stability, CEPR Press, Paris & London. https://cepr.org/publications/books-and-reports/monetary-unions-and-hard-pegs-effects-trade-financial-development

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Cohen, B, ‘America's Interest in Dollarization‘, in Melitz, J, G von Furstenberg and V Alexander (eds), Monetary Unions and Hard Pegs: Effects on Trade, Financial Development and Stability, CEPR Press, Paris & London. https://cepr.org/publications/books-and-reports/monetary-unions-and-hard-pegs-effects-trade-financial-development

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Feige, E and J Dean, ‘Dollarization and Euroization in Transition Countries: Currency Substitution, Asset Substitution, Network Externalities, and Irr‘, in Melitz, J, G von Furstenberg and V Alexander (eds), Monetary Unions and Hard Pegs: Effects on Trade, Financial Development and Stability, CEPR Press, Paris & London. https://cepr.org/publications/books-and-reports/monetary-unions-and-hard-pegs-effects-trade-financial-development

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Storti, C and P De Grauwe, ‘Electronic Money and the Optimal Size of Monetary Unions‘, in Melitz, J, G von Furstenberg and V Alexander (eds), Monetary Unions and Hard Pegs: Effects on Trade, Financial Development and Stability, CEPR Press, Paris & London. https://cepr.org/publications/books-and-reports/monetary-unions-and-hard-pegs-effects-trade-financial-development

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Genberg, H, ‘Currency Substitution in Anticipation of EU Accession‘, in Melitz, J, G von Furstenberg and V Alexander (eds), Monetary Unions and Hard Pegs: Effects on Trade, Financial Development and Stability, CEPR Press, Paris & London. https://cepr.org/publications/books-and-reports/monetary-unions-and-hard-pegs-effects-trade-financial-development

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Santos, J and C Kahn, ‘Allocating Lending of Last Resort and Supervision in the Euro Area‘, in Melitz, J, G von Furstenberg and V Alexander (eds), Monetary Unions and Hard Pegs: Effects on Trade, Financial Development and Stability, CEPR Press, Paris & London. https://cepr.org/publications/books-and-reports/monetary-unions-and-hard-pegs-effects-trade-financial-development