{
  "title": "A Formal Model of Optimum Currency Areas",
  "publication": "IMF Working Papers, April 1, 1994",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2016/12/30/a-formal-model-of-optimum-currency-areas-1249",
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  "summary": "A model of optimum currency areas is presented using a general equilibrium model with regionally differentiated goods. The choice of a currency union depends upon the size of the underlying disturbances, the correlation between these disturbances, the costs of transactions across currencies, factor",
  "sections": [
    {
      "heading": "Summary",
      "content": "- A model of optimum currency areas is presented using a general equilibrium model with regionally differentiated goods.\n- The choice of a currency union depends upon:\n  - the size of the underlying disturbances,\n  - the correlation between these disturbances,\n  - the costs of transactions across currencies,\n  - factor mobility across regions,\n  - the interrelationships between demand for different goods.\n- It is found that, while a currency union can raise the welfare of the regions within the union, it unambiguously lowers welfare for those outside the union."
    },
    {
      "heading": "Key findings and conclusions",
      "content": "- A currency union can raise the welfare of regions within the union.\n- A currency union unambiguously lowers welfare for regions outside the union.\n- Determinants of the desirability of joining a currency union include:\n  - size of underlying disturbances,\n  - correlation between disturbances,\n  - transaction costs across currencies,\n  - factor mobility across regions,\n  - interrelationships between demand for different goods."
    },
    {
      "heading": "Policy-relevant implications",
      "content": "- Evaluations of joining or forming a currency union should explicitly consider:\n  - measured size and correlation of regional shocks,\n  - transaction costs associated with multi-currency trade,\n  - the degree of factor mobility (labor and capital) across regions,\n  - demand interrelationships across regionally differentiated goods.\n- Policymakers should weigh welfare gains for union members against welfare losses for non-members when assessing the broader regional consequences of monetary integration."
    },
    {
      "heading": "Publication and metadata",
      "content": "- Author: Tamim Bayoumi\n- Date: April 1, 1994\n- Also published in Staff Papers, Vol. 41, No. 4, December 1994.\n- Series: Working Paper No. 1994/042\n- Issue: 042\n- Volume: 1994\n- Pages: 22\n- DOI: https://doi.org/10.5089/9781451846171.001\n- Stock No: WPIEA0421994\n- ISBN: 9781451846171\n- ISSN: 1018-5941\n- Subjects: Economic integration, Employment, Exchange rates, Foreign exchange, Labor, Labor demand, Monetary unions\n- Keywords: choice of a currency union, cost t, currency union, currency union in a bloc, Employment, entrepot trade, exchange rate Ei, Exchange rates, existing currency union, Labor demand, larger currency union, Monetary unions, results from a currency union, separate currency, single currency zone, two-region currency union, union in a bloc, WP\n\nSource: \"A Formal Model of Optimum Currency Areas\", Tamim Bayoumi, IMF Working Papers 1994/042.\n\n---\n\n\nSource: https://www.imf.org/en/publications/wp/issues/2016/12/30/a-formal-model-of-optimum-currency-areas-1249"
    }
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    "Authors: Tamim Bayoumi",
    "Published: April 1, 1994",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781451846171.001",
    "A model of optimum currency areas is presented using a general equilibrium model with regionally differentiated goods.",
    "The choice of a currency union depends upon:",
    "It is found that, while a currency union can raise the welfare of the regions within the union, it unambiguously lowers welfare for those outside the union.",
    "A currency union can raise the welfare of regions within the union.",
    "A currency union unambiguously lowers welfare for regions outside the union.",
    "Determinants of the desirability of joining a currency union include:",
    "Evaluations of joining or forming a currency union should explicitly consider:",
    "Policymakers should weigh welfare gains for union members against welfare losses for non-members when assessing the broader regional consequences of monetary integration.",
    "Author: Tamim Bayoumi",
    "Date: April 1, 1994",
    "Also published in Staff Papers, Vol. 41, No. 4, December 1994.",
    "Series: Working Paper No. 1994/042",
    "Issue: 042",
    "Volume: 1994",
    "Pages: 22",
    "DOI: https://doi.org/10.5089/9781451846171.001",
    "Stock No: WPIEA0421994",
    "ISBN: 9781451846171",
    "ISSN: 1018-5941",
    "Subjects: Economic integration, Employment, Exchange rates, Foreign exchange, Labor, Labor demand, Monetary unions",
    "Keywords: choice of a currency union, cost t, currency union, currency union in a bloc, Employment, entrepot trade, exchange rate Ei, Exchange rates, existing currency union, Labor demand, larger currency union, Monetary unions, results from a currency union, separate currency, single currency zone, two-region currency union, union in a bloc, WP"
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