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Reflections on the optimal currency area (OCA) criteria in the light of EMU
Author(s) -
Artis M.J.
Publication year - 2003
Publication title -
international journal of finance and economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.505
H-Index - 39
eISSN - 1099-1158
pISSN - 1076-9307
DOI - 10.1002/ijfe.211
Subject(s) - optimum currency area , context (archaeology) , economics , currency , currency union , point (geometry) , business cycle , proposition , macroeconomics , economic and monetary union , european monetary union , european union , core (optical fiber) , international economics , monetary policy , computer science , telecommunications , paleontology , philosophy , geometry , mathematics , epistemology , biology
Optimal Currency Area (OCA) theory offers criteria for evaluating the optimality of monetary union arrangements. This paper reviews the use that has been made of these criteria in the specific context of European Monetary Union. It reviews the use of business cycle synchronization data and the data produced by SVAR analyses, which led to the ‘core–periphery’ distinction. It also reviews extensions of the criteria that have been proposed or generated in this context: in particular, the proposition that the criteria may be ‘endogenous’. It presents Taylor rule estimates to check for inhomogeneities in Euro Area performance. The paper concludes that OCA criteria provide a useful starting point for evaluating monetary union options. Copyright © 2003 John Wiley & Sons, Ltd.