Optimum Currency Area in Europe: An Alternative Evaluation

• Main Authors: KIM, Yoonbai, CHOW, Hwee Kwan
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2003
• Subjects: Optimum currency area; Alternative index; Regional shocks vs. Country-specific shocks; EMU participation; Macroeconomics
• Online Access: https://ink.library.smu.edu.sg/soe_research/180; https://ink.library.smu.edu.sg/context/soe_research/article/1179/viewcontent/Optimum_currency_area_in_Europe_2003.pdf
• Institution: Singapore Management University

In this paper we explore an alternative scheme to assess the suitability of adopting a common currency by Western European countries. It is based on the role of common regional shocks in the determination of output. The results show that the OCA theory well explains and predicts participation decisions in EMU. We also find that our OCA index is highly consistent with two popular schemes that have been introduced by Bayoumi and Eichengreen.