Trade Effects of Currency Unions : Do Economic Dissimilarities Matter?

Author/Editor:

Giorgia Albertin

Publication Date:

October 1, 2008

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

This paper provides a general equilibrium analysis of the trade effects of the formation of a currency union, and of its subsequent enlargement to include an economically dissimilar country. Furthermore, it investigates how economic dissimilarities among countries affect the magnitude of the trade effects fostered by a common currency. We show that sharing a common currency enhances the volume of bilateral trade among countries. However, the more economically dissimilar is an accession country, compared to the original members of a currency union, the smaller are the gains in trade that would follow the enlargement of a currency union.

Series:

Working Paper No. 08/249

Subject:

English

Publication Date:

October 1, 2008

ISBN/ISSN:

9781451871074/1018-5941

Stock No:

WPIEA2008249

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

27

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