TY  - JOUR
AU  - Rose,Andrew K.
AU  - Engel,Charles
TI  - Currency Unions and International Integration
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 7872
PY  - 2000
Y2  - September 2000
UR  - http://www.nber.org/papers/w7872
L1  - http://www.nber.org/papers/w7872.pdf
N1  - Author contact info:
Andrew K. Rose
Haas School of Business Administration
University of California, Berkeley
Berkeley, CA 94720-1900
Tel: 510/642-6609
Fax: 510/642-4700
E-Mail: arose@haas.berkeley.edu

Charles Engel
Department of Economics
University of Wisconsin
1180 Observatory Drive
Madison, WI  53706-1393
Tel: 608/262-3697
Fax: 608/262-2033
E-Mail: cengel@ssc.wisc.edu
AB  - This paper characterizes the integration patterns of international currency unions (such as the CFA Franc zone and the East Caribbean Currency Area). We empirically explore different features of currency unions, and compare them both to countries with sovereign monies, and to regions within nations. We ask: are countries within international currency unions as integrated as regions within political unions?  We do this by examining the criteria for Mundell's concept of an optimum currency area. We find that members of currency unions are more integrated than countries with their own currencies, but less integrated than regions within a country. For instance, we find that currency union members have more trade and less volatile real exchange rates than countries with their own monies, but less trade and more volatile exchange rates than regions within individual countries. Similarly, business cycles are more highly synchronized across currency union countries than across countries with sovereign monies, but not as synchronized as regions of a single country.  Finally, currency union membership is not associated with significantly greater risk sharing, though risk sharing is widespread within countries.
ER  -