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Monetary Union and the Transaction Cost Savings of a Single Currency

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  • Rodriguez Mendizabal, Hugo

Abstract

This paper computes the transaction cost savings derived from the European Monetary Union. A continuous-time, stochastic, Baumol-like model is generalized to include several currencies and calibrated to fit European data. The analysis implies an upper bound for the savings derived from reductions in transaction costs of approximately 0.69% of Union GDP. Additionally, the magnitudes of the brokerage fee and the volatility of transactions, whose estimation has traditionally been difficult to address empirically, are approximated for Europe. Copyright 2002 by Blackwell Publishing Ltd.

Suggested Citation

  • Rodriguez Mendizabal, Hugo, 2002. "Monetary Union and the Transaction Cost Savings of a Single Currency," Review of International Economics, Wiley Blackwell, vol. 10(2), pages 263-277, May.
    • Handle: RePEc:bla:reviec:v:10:y:2002:i:2:p:263-77
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    Cited by:

    1. Maurice Obstfeld, 1998. "Open‐Economy Macroeconomics: Developments in Theory and Policy," Scandinavian Journal of Economics, Wiley Blackwell, vol. 100(1), pages 247-275, March.
    2. Bonpasse, Morrison, 2007. "The Single Global Currency - Common Cents for Business," MPRA Paper 6199, University Library of Munich, Germany.
    3. repec:zbw:rwirep:0489 is not listed on IDEAS
    4. Paul R. Bergin & Reuven Glick, 2005. "Tradability, Productivity, and Understanding International Economic Integration," NBER Working Papers 11637, National Bureau of Economic Research, Inc.
    5. Timo Baas, 2014. "Estonia and the European Monetary Union – Are there Benefi ts from a “Late” Accession?," Ruhr Economic Papers 0489, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    6. Bonpasse, Morrison, 2008. "The Single Global Currency - Common Cents for Commerce," MPRA Paper 7002, University Library of Munich, Germany.
    7. Paul R. Bergin & Reuven Glick, 2005. "Tradability, Productivity, and Understanding International Economic Integration," NBER Working Papers 11637, National Bureau of Economic Research, Inc.

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