A Formal Model of Optimum Currency Areas

Author: Mr. Tamim Bayoumi

Volume/Issue: Volume 1994 Issue 042

Publication date: April 1994

ISBN: 9781451846171

$20.00

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Topics covered in this book

This title contains information about the following subjects. Click on a subject if you would like to see other titles with the same subjects.

Exports and Imports , Labor , Economics- Macroeconomics , WP , currency union , entrepot trade , union in a bloc , single currency zone , choice of a currency union , cost t , currency union in a bloc , results from a currency union , two-region currency union , larger currency union , exchange rate Ei , separate currency , existing currency union , Monetary unions , Exchange rates , Labor demand , Employment

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Summary

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.