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dc.contributor.authorCORSETTI, Giancarlo
dc.date.accessioned2008-02-13T13:14:49Z
dc.date.available2008-02-13T13:14:49Z
dc.date.issued2008
dc.identifier.issn1725-6704
dc.identifier.urihttp://hdl.handle.net/1814/8083
dc.description.abstractWhat can be learnt from revisiting the Optimal Currency Areas (OCA) theory 50 years from its birth, in light of recent advances in open economy macro and monetary theory? This paper presents a stylized micro-founded model of the costs of adopting a common currency, relative to an ideal benchmark in which domestic monetary authorities pursue country-specific efficient stabilization. Costs from (a) limiting monetary autonomy and (b) giving up exchange rate flexibility are examined in turn. These costs will generally be of the same magnitude as the costs of the business cycle. However, to the extent that exchange rates do not perform the stabilizing role envisioned by traditional OCA theory, a common monetary policy can be as efficient as nationally differentiated policies, even when shocks are strongly asymmetric, provided that the composition of aggregate spending tends to be symmetric at unionwide level. Convergence in consumption (and spending) patterns thus emerges as a possible novel attribute of countries participating in an efficient currency area.en
dc.format.mimetypeapplication/pdf
dc.language.isoenen
dc.publisherEuropean University Institute
dc.relation.ispartofseriesEUI ECOen
dc.relation.ispartofseries2008/12en
dc.rightsinfo:eu-repo/semantics/openAccess
dc.subjectOptimum Currency Areaen
dc.subjectoptimal monetary policyen
dc.subjectcosts of business cycleen
dc.subjectexchange rate regimeen
dc.subjectinternational policy cooperationen
dc.subjectNew Open Economy Macroeconomicsen
dc.subjectE31en
dc.titleA Modern Reconsideration of the Theory of Optimal Currency Areasen
dc.typeWorking Paperen
dc.neeo.contributorCORSETTI|Giancarlo|aut|EUI70002
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