The Minimum Economic Dividend for Joining a Currency Union
A two-country model is developed to show how the optimality of a currency union depends on whether it brings an economic dividend in terms of potential growth and the Balassa-Samuelson (BS) effect (the steady appreciation of the real exchange rate due to cross-country differences in intersectoral pr...
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| Veröffentlicht in: | German economic review (Oxford) 2012-05, Vol.13 (2), p.127-141 |
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| creator | Zorzi, Michele Ca' De Santis, Roberto A. Zampolli, Fabrizio |
| description | A two-country model is developed to show how the optimality of a currency union depends on whether it brings an economic dividend in terms of potential growth and the Balassa-Samuelson (BS) effect (the steady appreciation of the real exchange rate due to cross-country differences in intersectoral productivity gaps). The model shows that such dividend needs to be larger, the higher the BS effect, the smaller the size of the economy, the larger the cross-country difference in the standard deviation of the supply shocks, the smaller their correlation and the larger the standard deviation of real exchange rate shocks. We calibrate the model to quantify such dividend as a function of plausible ranges of the parameter values. The results suggest that both the BS effect and the size of real exchange rate shocks play a key role in evaluating the optimality of accessing the currency union. |
| doi_str_mv | 10.1111/j.1468-0475.2011.00550.x |
| format | Article |
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The model shows that such dividend needs to be larger, the higher the BS effect, the smaller the size of the economy, the larger the cross-country difference in the standard deviation of the supply shocks, the smaller their correlation and the larger the standard deviation of real exchange rate shocks. We calibrate the model to quantify such dividend as a function of plausible ranges of the parameter values. 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The results suggest that both the BS effect and the size of real exchange rate shocks play a key role in evaluating the optimality of accessing the currency union.</description><subject>Balassa-Samuelson effect</subject><subject>Correlation</subject><subject>Currencies</subject><subject>currency union</subject><subject>Economic integration</subject><subject>Economic theory</subject><subject>Exchange rates</subject><subject>Foreign exchange rates</subject><subject>inflation differentials</subject><subject>International economic relations</subject><subject>Monetary policy</subject><subject>Monetary unions</subject><subject>Standard deviation</subject><subject>Studies</subject><subject>Transaction costs</subject><subject>welfare</subject><issn>1465-6485</issn><issn>1468-0475</issn><fulltext>true</fulltext><rsrctype>article</rsrctype><creationdate>2012</creationdate><recordtype>article</recordtype><recordid>eNqNkE9P3DAQxaOqSKXQ72Cpl16Sjv8lTiUO7bIstBQqBOJouckEvE1sam9g99vjsAhVPVT1xSPN7z29eVlGKBQ0vY_LgopS5SAqWTCgtACQEor1q2z3ZfH6aZZ5KZR8k72NcQlAFQe5m326vEXy3To7jAOZN975wTbk0N7bFl1LOh_IV5_W7oYYMhtDQNdsyJWz3u1nO53pI757_veyq6P55ew4Pz1fnMw-n-aN5DXklaKilh3nXVPXKGoEgQq4FF3LAakyQFmpqoYbaoQyLfvJUKCsTUVNLVvF97IPW9-74H-PGFd6sLHBvjcO_Rg1BUYpgxJYQt__hS79GFxKlyiglUpHV4lSW6oJPsaAnb4LdjBhkyA9laqXeupOT93pqVT9VKpeJ-nBVvpge9z8t04v5vOLNCX90bPe9CsMLd6EcZOGP3P-24pyRtl0Q741snGF65cgJvzSZcWT5vpsoa-__LhYwOybPuaP20efPw</recordid><startdate>201205</startdate><enddate>201205</enddate><creator>Zorzi, Michele Ca'</creator><creator>De Santis, Roberto A.</creator><creator>Zampolli, Fabrizio</creator><general>Blackwell Publishing Ltd</general><general>De Gruyter</general><general>Walter de Gruyter GmbH</general><scope>BSCLL</scope><scope>AAYXX</scope><scope>CITATION</scope><scope>8BJ</scope><scope>FQK</scope><scope>JBE</scope></search><sort><creationdate>201205</creationdate><title>The Minimum Economic Dividend for Joining a Currency Union</title><author>Zorzi, Michele Ca' ; De Santis, Roberto A. ; Zampolli, Fabrizio</author></sort><facets><frbrtype>5</frbrtype><frbrgroupid>cdi_FETCH-LOGICAL-c5390-781495f33fc99e49e04e80354fd30e18a012687c3a1a48ad2b2e4e59a71a95d83</frbrgroupid><rsrctype>articles</rsrctype><prefilter>articles</prefilter><language>eng</language><creationdate>2012</creationdate><topic>Balassa-Samuelson effect</topic><topic>Correlation</topic><topic>Currencies</topic><topic>currency union</topic><topic>Economic integration</topic><topic>Economic theory</topic><topic>Exchange rates</topic><topic>Foreign exchange rates</topic><topic>inflation differentials</topic><topic>International economic relations</topic><topic>Monetary policy</topic><topic>Monetary unions</topic><topic>Standard deviation</topic><topic>Studies</topic><topic>Transaction costs</topic><topic>welfare</topic><toplevel>peer_reviewed</toplevel><toplevel>online_resources</toplevel><creatorcontrib>Zorzi, Michele Ca'</creatorcontrib><creatorcontrib>De Santis, Roberto A.</creatorcontrib><creatorcontrib>Zampolli, Fabrizio</creatorcontrib><collection>Istex</collection><collection>CrossRef</collection><collection>International Bibliography of the Social Sciences (IBSS)</collection><collection>International Bibliography of the Social Sciences</collection><collection>International Bibliography of the Social Sciences</collection><jtitle>German economic review (Oxford)</jtitle></facets><delivery><delcategory>Remote Search Resource</delcategory><fulltext>fulltext</fulltext></delivery><addata><au>Zorzi, Michele Ca'</au><au>De Santis, Roberto A.</au><au>Zampolli, Fabrizio</au><format>journal</format><genre>article</genre><ristype>JOUR</ristype><atitle>The Minimum Economic Dividend for Joining a Currency Union</atitle><jtitle>German economic review (Oxford)</jtitle><addtitle>German Econ. 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| language | eng |
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| source | Access via Wiley Online Library; De Gruyter journals |
| subjects | Balassa-Samuelson effect Correlation Currencies currency union Economic integration Economic theory Exchange rates Foreign exchange rates inflation differentials International economic relations Monetary policy Monetary unions Standard deviation Studies Transaction costs welfare |
| title | The Minimum Economic Dividend for Joining a Currency Union |
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