Empirical Evidence on Common Money and Uncommon Regions in the United States

  • Michael Horvath
Part of the ZEI Studies in European Economics and Law book series (ZEIS, volume 1)


European monetary unification by eleven member states in January 1999 will create a currency union. The road to monetary union over the past decade or more has not been a smooth one. A particular concern among economists and politicians alike is the extent to which the adoption and use of a common currency prevents members in the currency union from engaging in region-specific monetary and fiscal policies in response to region-specific disturbances. The notion of optimality in a currency area, as propounded by Mundell (1961), Meade (1957), and Kenen (1969) made explicit reference to the geographic nature of shocks. Regions whose various economic shocks were highly correlated would not suffer from the loss of autonomy in monetary policy implied by currency unification since monetary responses to economic disturbances that were optimal for the union as a whole should be optimal for all regions of the union individually.


Monetary Policy European Monetary Union Currency Union Taylor Rule Census Region 
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Copyright information

© Springer Science+Business Media New York 2000

Authors and Affiliations

  • Michael Horvath
    • 1
  1. 1.Stanford UniversityStanfordUSA

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