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Should Eastern European Countries Join the Euro? A Review and Update of Trade Estimates and Consideration of Endogenous OCA Criteria

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  • Frankel, Jeffrey

    (Harvard U)

Abstract

An advantage of monetary union is facilitating trade. After many critiques, Rose's basic finding is left standing: currency unions have greater trade effects than previously believed. Updated estimates also find an effect of the euro on trade among members that is significant (though mysteriously still only 15%). An argument for retaining monetary independence is asymmetric shocks, i.e., low cyclical correlation. Eastern European countries might want to wait before joining, because their trade patterns and cyclical correlations have been gradually shifting toward Western Europe anyway; thus the argument for the euro strengthens as time passes, while the argument against it weakens.

Suggested Citation

  • Frankel, Jeffrey, 2008. "Should Eastern European Countries Join the Euro? A Review and Update of Trade Estimates and Consideration of Endogenous OCA Criteria," Working Paper Series rwp08-059, Harvard University, John F. Kennedy School of Government.
    • Handle: RePEc:ecl:harjfk:rwp08-059
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    2. Marc-Alexandre Sénégas, 2010. "La théorie des zones monétaires optimales au regard de l'euro : Quels enseignements après dix années d'union économique et monétaire en Europe ?," Revue d'économie politique, Dalloz, vol. 120(2), pages 379-419.
    3. Dariusz K. Rosati, 2013. "Czy Polska powinna przystąpić do strefy euro?," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 10, pages 5-37.
    4. Cieślik Andrzej & Michałek Jan & Michałek Anna, 2014. "Does the Common Currency Increase Exports? Evidence from Firm-Level Data," International Journal of Management and Economics, Warsaw School of Economics, Collegium of World Economy, vol. 41(1), pages 8-22, March.
    5. Katerina Arnostova & Oxana Babecka Kucharcukova & Jan Babecky & Vojtech Belling & Sona Benecka & Jan Bruha & Martin Gurtler & Tomas Holub & Eva Hromadkova & Lubos Komarek & Zlatuse Komarkova & Petr Kr, 2016. "Analyses of the Czech Republic's Current Economic Alignment with the Euro Area 2016," Occasional Publications - Edited Volumes, Czech National Bank, number as16 edited by Katerina Arnostova & Lucie Matejkova, January.
    6. Tomas Adam & Oxana Babecka Kucharcukova & Jan Babecky & Vojtech Belling & Sona Benecka & Jan Bruha & Kamil Galuscak & Tomas Holub & Eva Hromadkova & Lubos Komarek & Zlatuse Komarkova & Kamila Kulhava , 2015. "Analyses of the Czech Republic's Current Economic Alignment with the Euro Area 2015," Occasional Publications - Edited Volumes, Czech National Bank, number as15 edited by Kamila Kulhava & Lucie Matejkova, January.
    7. Gary A. Dymski, 2013. "The Crisis of the Core Seen through the Eyes of the Periphery: A Schelling Model of the Global-South Megacity and the European Crisis," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 60(4), pages 433-455, June.
    8. Dumitru Miron & Paul-Gabriel Miclaus & Danusia Vamvu, 2018. "Euro’s Trade Effect: Homogeneity Versus Heterogeneity in the Euro Zone," International Journal of Academic Research in Business and Social Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Business and Social Sciences, vol. 8(6), pages 350-360, June.
    9. Andrzej Cieslik & Jan Michalek & Anna Michalek, 2013. "The Impact Of The Common Currency On Exports Of New Emu Members: Firm-Level Evidence For Slovenia And Slovakia," Equilibrium. Quarterly Journal of Economics and Economic Policy, Institute of Economic Research, vol. 8(4), pages 7-23, December.
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    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions

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