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Optimum Currency Area Theory: A Framework for Discussion about Monetary Integration

Author

Listed:
  • Horvath, Roman
  • Komarek, Lubos
Abstract
In this paper the authors calculate OCA-indexes for industrial countries in an effort to estimate the benefit-cost ratio of adopting a common currency. The results correspond to the estimation of Bayoumi and Eichengreen (1997b) and show that the ranking of the economies suitable to form a monetary union stays the same in the 1980s as well as in the 1990s. In other words, the economies, which were structurally close to each other in the 1980s, remain close in the 1990s and the opposite is valid for the structurally different economies. This empirical estimation also does not provide evidence for views, which emphasise the seemingly striking difference between the core and the periphery of the European Union. The authors perform also an estimation of the same index by including the Czech Republic and find no support for the view that the economy of the Czech Republic could possibly structurally differ more than the EMU member countries between each other. Then they conclude that if the EMU is sustainable, the accession of the Czech economy should not change it.

Suggested Citation

  • Horvath, Roman & Komarek, Lubos, 2003. "Optimum Currency Area Theory: A Framework for Discussion about Monetary Integration," Economic Research Papers 269478, University of Warwick - Department of Economics.
    • Handle: RePEc:ags:uwarer:269478
    DOI: 10.22004/ag.econ.269478
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    References listed on IDEAS

    as
    1. Horvath, Roman & Komárek, Luboš, 2002. "Optimum Currency Area Theory : An Approach For Thinking About Monetary Integration," The Warwick Economics Research Paper Series (TWERPS) 647, University of Warwick, Department of Economics.
    2. Isard,Peter, 1995. "Exchange Rate Economics," Cambridge Books, Cambridge University Press, number 9780521466004, September.
    3. repec:zbw:bofitp:2001_008 is not listed on IDEAS
    4. repec:lic:licosd:10601 is not listed on IDEAS
    5. Bayoumi, Tamim & Eichengreen, Barry, 1996. "Operationalizing the Theory of Optimum Currency Areas," CEPR Discussion Papers 1484, C.E.P.R. Discussion Papers.
    6. Schweickert, Rainer, 2001. "Assessing the advantages of EMU-enlargement for the EU and the accession countries: a comparative indicator approach," Kiel Working Papers 1080, Kiel Institute for the World Economy (IfW Kiel).
    7. Isard,Peter, 1995. "Exchange Rate Economics," Cambridge Books, Cambridge University Press, number 9780521460477, September.
    8. Horvath, Roman & Komarek, Lubos, 2002. "Optimum Currency Area Theory: A Framework for Discussion about Monetary Integration," Economic Research Papers 269460, University of Warwick - Department of Economics.
    9. Torres,Francisco & Giavazzi,Francesco (ed.), 1993. "Adjustment and Growth in the European Monetary Union," Cambridge Books, Cambridge University Press, number 9780521440196, September.
    10. Andrew Coleman, 2001. "Three Perspectives on an Australasian Monetary Union," RBA Annual Conference Volume (Discontinued), in: David Gruen & John Simon (ed.),Future Directions for Monetary Policies in East Asia, Reserve Bank of Australia.
    11. Bayoumi, Tamim & Eichengreen, Barry, 1998. "Exchange rate volatility and intervention: implications of the theory of optimum currency areas," Journal of International Economics, Elsevier, vol. 45(2), pages 191-209, August.
    12. Mundell, Robert, 2000. "Currency Areas, Volatility and Intervention," Journal of Policy Modeling, Elsevier, vol. 22(3), pages 281-299, May.
    13. Horvath, Julius & Jonas, Jiri, 1998. "Exchange rate regimes in the transition economies: Case study of the Czech Republic: 1990-1997," ZEI Working Papers B 11-1998, University of Bonn, ZEI - Center for European Integration Studies.
    14. Ronald McKinnon, 2000. "Mundell, the Euro, and Optimum Currency Areas," Working Papers 00009, Stanford University, Department of Economics.
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    Cited by:

    1. Abban, Stanley & Ofori-Abebrese, Grace, 2019. "The Prospect Of ECOWAS Currency Union On Intra-Regional Trade," MPRA Paper 102226, University Library of Munich, Germany.
    2. Pucar Emilija Beker & Glavaški Olgica, 2019. "Macroeconomic Еxternal (Im)Balances within the Eurozone: Core Vs Periphery," Economic Themes, Sciendo, vol. 57(3), pages 257-272, September.
    3. Horvath, Roman & Komarek, Lubos, 2002. "Optimum Currency Area Theory: A Framework for Discussion about Monetary Integration," Economic Research Papers 269460, University of Warwick - Department of Economics.
    4. Horvath, Julius, 2003. "Optimum currency area theory: A selective review," BOFIT Discussion Papers 15/2003, Bank of Finland Institute for Emerging Economies (BOFIT).
    5. Wei Song & Weiyue Wang, 2009. "Asian currency union? An investigation into China's membership with other Asian countries," Journal of Chinese Economic and Business Studies, Taylor & Francis Journals, vol. 7(4), pages 457-476.
    6. Krzysztof Beck, 2013. "Structural Similarity as a Determinant of Business Cycle Synchronization in the European Union: A Robust Analysis," Research in Economics and Business: Central and Eastern Europe, Tallinn School of Economics and Business Administration, Tallinn University of Technology, vol. 5(2).

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