Assessing a perfect European optimum currency area: a common cycles approach

Michel Beine, Bertrand Candelon, Alain Hecq

Research output: Contribution to journalArticlepeer-review

14 Citations (Scopus)

Abstract

In this paper we introduce a new definition for an optimum currency area (OCA) which is more restrictive than the previous ones. Indeed, using both a cointegration and a common cyclical feature analysis in a VAR (p) framework, a set of countries is said to constitute a perfect OCA if the short-run dynamics is perfectly correlated while long-run relationships are not constrained. Using seasonally unadjusted industrial production indices for the period 75:M1 to 97:M4, we show that European countries are not sufficiently related to fit our definition.

Original languageEnglish
Article number276993
Pages (from-to)115-132
Number of pages18
JournalEmpirica
Volume27
Issue number2
DOIs
Publication statusPublished - 2000

Keywords

  • Common cycles
  • European monetary integration
  • Optimum currency area

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