Currency areas in theory and practice
Date
2005
Authors
Pomfret, R.
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Type:
Journal article
Citation
Economic Record, 2005; 81(253):166-176
Statement of Responsibility
Richard Pomfret
Conference Name
Abstract
The dominant theoretical framework for analysing currency domains, optimum currency area (OCA) theory, has a miserable record in explaining actual currency area formation, expansion or dissolution. Ministates use foreign currencies to avoid high transactions costs; otherwise countries want control over their monetary policy. Nations do not tolerate multiple currencies, because they complicate public revenue and expenditure decisions. These arguments regarding control of monetary policy and content of fiscal policy differ from the OCA theory's emphasis on a trade-off between the microeconomic transactions costs benefits of a wider currency area and the macroeconomic policy benefits of a narrower currency area.
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Dissertation Note
Provenance
Description
The definitive version is available at www.blackwell-synergy.com