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Currency Unions in Prospect and Retrospect

João Santos Silva () and Silvana Tenreyro ()

Annual Review of Economics, 2010, vol. 2, issue 1, 51-74

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 euro's impact on trade has been close to zero. After reviewing the costs and benefits of joining a currency union, 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: effects of currency unions; euro; monetary union; optimum currency areas; trade (search for similar items in EconPapers)
JEL-codes: F14 F33 (search for similar items in EconPapers)
Date: 2010
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