Currency Unions

49 Pages Posted: 24 Sep 2000 Last revised: 31 Aug 2022

See all articles by Alberto F. Alesina

Alberto F. Alesina

Harvard University - Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Robert J. Barro

Harvard University - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: September 2000

Abstract

What is the optimal number of currencies in the world? Common currencies affect trading costs and, thereby, the amounts of trade, output, and consumption. From the perspective of monetary policy, the adoption of another country's currency trades off the benefits of commitment to price stability against the loss of an independent stabilization policy. The nature of the tradeoff depends on co-movements of disturbances, on distance, trading costs, and on institutional arrangements such as the willingness of anchor countries to accommodate to the interests of clients.

Suggested Citation

Alesina, Alberto F. and Barro, Robert J., Currency Unions (September 2000). NBER Working Paper No. w7927, Available at SSRN: https://ssrn.com/abstract=243499

Alberto F. Alesina (Contact Author)

Harvard University - Department of Economics ( email )

Littauer Center
Cambridge, MA 02138
United States
617-495-8388 (Phone)
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Centre for Economic Policy Research (CEPR)

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United Kingdom

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
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Robert J. Barro

Harvard University - Department of Economics ( email )

Littauer Center
Cambridge, MA 02138
United States
617-495-3203 (Phone)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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