A stochastic simulation model of an optimum currency area

Michel Beine, Frédéric Docquier

Research output: Contribution to journalArticlepeer-review

1 Citation (Scopus)


In this paper, we develop a two-country stochastic simulation model based on the theory of optimum currency areas, which studies the desirability of a monetary union. Extending the general equilibrium model of Ricci (1995), we introduce the intertemporal dimension, which allows to deal more accurately with labor mobility and shock dynamics. We analyse the importance of shocks asymmetries and investigate the role of labor mobility. Furthermore, we illustrate the influence of trade openness and the impact of a fiscal federalism system, assuming a specific transfer allocation rule based on the relative evolution of unemployment between the two countries.

Original languageEnglish
Pages (from-to)227-255
Number of pages29
JournalOpen Economies Review
Issue number3
Publication statusPublished - 1998


  • Fiscal federalism
  • International labor mobility
  • Optimum currency area


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