A country's suitability for entry into a currency union depends on a number of economic conditions. These include, inter alia, the intensity of trade with other potential members of the currency union, and the extent to which domestic business cycles are correlated with those of the other countries. But international trade patterns and international business cycle correlations are endogenous. This paper develops and investigates the relationship between the two phenomenon. Using thirty years of data for twenty industrialized countries, we uncover a strong and striking empirical finding: countries with closer trade links tend to have more tightly correlated business cycles. It follows that countries are more likely to satisfy the criteria for entry into a currency union after taking steps toward economic integration than before. JEL Classification Numbers: F15, F41

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Are currencycrashes in developing countries all the result of similar policy mistakes? Or are they instead the result of a myriad unfortunateshocks? Can they be predictedex anre with standardeconomic indicators? Do different countriesexpost react to crashes in similar fashion, or do the policy responsesvary by country and over time? In short: Are currenc)' crashes aIl alike? The objectiveof this study is to look at a large sample of developing country experiences, and to arrive at a broad-brushstatistical characterizationof currency crashes. It is not an attempt to formulateor test specifictheories of what causes these crashes. Some may have been caused by idiosyncraticshocks which are better viewed as bad luck than anything else. Others may have resulted from poor fundamentalsor poor policy. We examinea variety of potential causes of crashes, especiallythose that add to a country'svulnerabilityto a crash. We also look at the effects of currency crashes.