Optimum currency area theory: an approach for thinking about monetary integration
Horváth, Roman and Komárek, Luboš (2002) Optimum currency area theory: an approach for thinking about monetary integration. Working Paper. Coventry: University of Warwick, Department of Economics. Warwick economic research papers (No.647).
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The optimum currency area (OCA) theory tries to answer an almost prohibitively difficult question: what is the optimal number of currencies to be used in one region. The difficulty of the question leads to a low operational precision of OCA theory. Therefore, we argue that the OCA theory is a framework for discussion about monetary integration. We summarize theoretical issues from the classical contributions to the OCA literature in the 1960s to the modern “endogenous view”. A short survey of empirical studies on the OCA theory in the connection with the EMU and the Czech Republic is presented. Finally, we calculate OCA-indexes for the Czech Republic, EU, Germany and Portugal. The index predicts exchange rates variability from the view of traditional OCA criteria and asseses benefit-cost ratio of implementing common currency for a pair of the countries. We compare the structural similarity of the Czech Republic and Portugal to the German economy and find that the Czech economy is closer. The results are reversed when the EU economy is considered as a benchmark country.
|Item Type:||Working or Discussion Paper (Working Paper)|
|Subjects:||H Social Sciences > HG Finance
H Social Sciences > HB Economic Theory
|Divisions:||Faculty of Social Sciences > Economics|
|Library of Congress Subject Headings (LCSH):||Monetary unions, Monetary policy -- European Union countries, Dependency, Convergence (Economics), European Union -- Economic conditions, Czech Republic -- Economic conditions|
|Series Name:||Warwick economic research papers|
|Publisher:||University of Warwick, Department of Economics|
|Place of Publication:||Coventry|
|Official Date:||August 2002|
|Number of Pages:||30|
|Status:||Not Peer Reviewed|
|Access rights to Published version:||Open Access|
|Funder:||Grantová agentura České republiky [Grant Agency of the Czech Republic] (GACR)|
|Grant number:||402/00/0312 (GACR)|
BAYOUMI, T. - EICHENGREEN, B. (1993): Shocking Aspects of European Monetary Integration, In: Torres, G. - Giavazzi, F.: Adjustment and Growth in European Monetary Union. Cambridge University Press, 1993, pp.193-229.
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