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Optimal currency areas

By Alberto Alesina, Robert J. Barro and Silvana Tenreyro

Abstract

As the number of independent countries increases and their economies become more integrated, we would expect to observe more multi-country currency unions. This paper explores the pros and cons for different countries to adopt as an anchor the dollar, the euro, or the yen. Although there appear to be reasonably well-defined euro and dollar areas, there does not seem to be a yen area. We also address the question of how trade and co-movements of outputs and prices would respond to the formation of a currency union. This response is important because the decision of a country to join a union would depend on how the union affects trade and co-movements

Topics: HB Economic Theory
Publisher: National Bureau of Economic Research
Year: 2002
OAI identifier: oai:eprints.lse.ac.uk:5307
Provided by: LSE Research Online
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