The theory of optimum currency areas,trade adjustment,and trade |
| |
Authors: | Jacques Mélitz |
| |
Institution: | (1) INSEE-CREST, 15 Blvd. Gabriel Péri, 92245 Malakoff, France |
| |
Abstract: | This article seeks to provide a closer integration of the theory of optimum currency areas with the theory of international trade. A currency area is treated as a continuous variable ranging from zero to one: zero if there is no enlargement, and some positive value otherwise, corresponding exactly to the percentge of trade in the enlarged area. The benefits of widening a currency area are then regarded, in terms of conventional trade theory, as equivalent to a reduction in transportation cost. The costs of widening a currency area are seen, instead, with reference to open economy macroeconomics, as a drop in the speed of adjustment of the terms of trade to their long-run equilibrium level. On this basis, it is shown that the marginal benefits of enlarging a currency area fall, the marginal costs rise, and an optimum size arises. But this size depends heavily on the optimal composition of the members.CEPR |
| |
Keywords: | optimum currency areas exchange rate regime trade adjustment international trade |
本文献已被 SpringerLink 等数据库收录! |
|