Currency Unions in Prospect and Retrospect
51 Pages Posted: 19 May 2010
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Currency Unions in Prospect and Retrospect
Currency Unions in Prospect and Retrospect
Date Written: May 2010
Abstract
We critically review the recent literature on currency unions, and discuss the methodological challenges posed by the empirical assessment of their costs and benefits. In the process, we provide evidence on the economic effects of the euro. In particular, and in contrast with estimates of the trade effect of other currency unions, we find that the impact of the euro on trade has been close to zero. After reviewing the costs and benefits, we conclude with some open questions on normative and positive aspects of the theory of currency unions, emphasizing the need for a unified welfare-based framework to weigh their costs and gains.
Keywords: currency union, euro
JEL Classification: F10
Suggested Citation: Suggested Citation
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