Deciding on Monetary Integration: An Operational Approach

Andrew Powell and Federico Sturzenegger

Working Paper Series from Harvard University, John F. Kennedy School of Government

Abstract: We develop a simple, n-country model to consider the costs and benefits of joining a monetary union. Our factor-OCA framework encompasses different approaches and allows us to consider the optimal composition of a monetary union for all the potential members. We illustrate the model in practice with various simulations and we develop two empirical applications based on expanding EMU and on whether there would be a benefit to deepening Nafta to be a monetary union. While some commentators have called for a one-world currency, we find full monetary integration has costs for some countries and benefits for others, perhaps explaining why this remains a controversial issue.

Date: 2007-09
New Economics Papers: this item is included in nep-cba, nep-cmp, nep-mac and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:ecl:harjfk:rwp07-041

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