North American Monetary Union: analytical principles and operational guidelines

The paper argues the case for a North American Monetary Union (NAMU) in parallel with NAFTA. The emergence of the Euro provides an economic blueprint for a continental monetary area built around the U.S. dollar. NAMU is an appropriate institutional response to the deep economic integration that has occurred between Canada, Mexico and the U.S. NAMU in particular is a superior alternative to dollarization in the Hemisphere. By way of making the case for a NAMU the paper also argues that from the Canadian perspective a) Canada’s floating exchange rate has not worked well; b) there are persuasive arguments for greater exchange rate fixity between Canada and the U.S.; and c) the longer-term objective of moving towards exchange-rate fixity should be a North American Monetary Union.