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 [in: F. Torres, F. Giavazzi (Eds.), Shocking Aspects of European Monetary Integration. in Adjustment and Growth in the European Monetary Union , Cambridge University Press, Cambridge (1993); European Economic Review 41 (1997) 761-770].
|Number of pages||8|
|State||Published - Dec 2003|
Bibliographical noteFunding Information:
We thank Reiny Iriana for research assistance and anonymous referees for valuable comments. This research was supported by University Research Grant (No. 3992097) at the National University of Singapore.
- Alternative index
- EMU participation
- Optimum currency area
- Regional shocks vs. Country-specific shocks
ASJC Scopus subject areas
- Economics and Econometrics