Pareto-optimal Delegation in Customs Unions

Optimal Currency Areas and Customs Unions: Are They Connected?

This paper examines the link between currency unions and customs unions. The size of a bloc of countries practising some form of co-ordination of monetary policy is limited by the incentive to free-ride that formation of the bloc creates. However, when the threat of a trade war is introduced, the stable size of the bloc increases. This suggests that a) large currency areas are more likely to em...

Strategic Delegation in Monetary Unions

In monetary unions, monetary policy is typically made by delegates of the member countries. This procedure raises the possibility of strategic delegation– that countries may choose the types of delegates to in‡uence outcomes in their favor. We show that without commitment in monetary policy, strategic delegation arises if and only if three conditions are met: shocks a¤ecting individual countrie...

Free Trade Agreements versus Customs Unions:

Overlapping bilateral free trade agreements (FTAs) are proliferating in East Asia. Quite a few economists worry about the spaghetti bowl phenomenon expected from the proliferating East Asian regional trade agreements (RTAs).The complicated web of hub-and-spoke type of FTAs can result in high costs for verifying rules of origin (RoO). As an alternative policy option to avoid the negative effect ...

Free Trade, Customs Unions, and Transfers

All countries would agree to immediate global free trade if countries were compensated for any terms-of-trade losses with transfers from countries whose terms-of-trade improve, and if customs unions were required to have no effects on non-member countries. Global free trade with transfers is in the core of a Kemp-WanGrinols customs union game. (52 words)

Notes On Strategic Delegation in Monetary Unions