Income and Price Insurance Aspects of Monetary Union

Furstenberg, von; George, M

doi:10.2139/ssrn.300249

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2005

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“…At the same time, the need to retain credibility is bound to put some checks on such behavior. 17. von Furstenberg (2004) argues that in an ideal world where monetary policy can succeed in entirely wiping out common disturbances, pooling monetary policy under a single authority may decrease business cycles correlation compared to what would obtain without a single monetary policy. This is because in a monetary union, idiosyncratic disturbances, unlike common shocks, do subside.…”

Section: Data Appendixmentioning

confidence: 99%

Monetary Union, Trade Integration, and Business Cycles in 19th Century Europe

Flandreau¹,

Maurel²

2005

Open Econ Rev

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This paper studies the impact of monetary arrangements on trade integration and business cycle correlation in late 19th century Europe. We estimate a gravity model and show that tighter monetary integration was associated with substantially higher trade, as in recent studies using contemporary data. For instance, the Austro-Hungarian monetary union improved trade between member states by a factor of 3. To explain this, we build and estimate a simple model where greater monetary integration weakens the current account constraint by fostering business cycle co-movements. Copyright Springer Science + Business Media, Inc. 2005optimum currency areas, endogeneity, trade, business cycles, monetary union,

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Section: Data Appendixmentioning

confidence: 99%