Gravity-based cross-sectional evidence indicates that currency unions stimulate trade; crosssectional evidence indicates that trade stimulates output. This paper estimates the effect that currency union has, via trade, on output per capita. We use economic and geographic data for over 200 countries to quantify the implications of currency unions for trade and output, pursuing a two-stage approa...

In light of the longstanding vision of economic and monetary integration in the ASEAN region and the importance of coordinating monetary policies to achieve it, the objective of this paper is to the assess the monetary policy synchronization among the founding members of the ASEAN, i.e., Indonesia, Malaysia, Philippines, Singapore and Thailand. Due to the importance of exchange rate movements t...

Already before the final introduction of the single European currency there have been negotiations on a further enlargement of the Eurozone to the East. The accession of 10 Central and Eastern European Countries (CEEC) to Euroland is likely to be realised within the next 10 years and it is an important issue to assess whether these candidates are better or worse suitable for EMU membership than...

This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate. Growth-indexed bonds have been suggested as a way of reducing...

I provide a framework for understanding the global financial architecture as an equilibrium outcome of the risk sharing between countries with different levels of financial development. The country that has the most developed financial sector takes on a larger proportion of global fundamental and financial risk because its financial intermediaries are better able to deal with funding problems f...

Large differences in national price levels exist across countries. In this paper, I develop a general equilibrium model predicting that these differences should be related to countries’ exchange rate regimes. My empirical findings confirm that countries with fixed exchange rate regimes have higher national price levels than countries with flexible regimes. At the disaggregate level, the relatio...

Three channels through which the IMF rescue package may affect international lending can be distinguished: debtor-side moral hazard, creditor-side moral hazard, and debtor and creditorsidemoral hazard.We show that if the rescue package fully benefits the debtor, no credit contract between him and the creditor arises. The other two kinds of moral hazard, where the creditor receives the rescue pa...

How does the sovereign credit ratings history provided by independent ratings agencies affect domestic financial sector development and international capital inflows to emerging countries? We address this question utilizing a comprehensive dataset of sovereign credit ratings from Standard and Poor’s from 1995-2003 for a cross-section of 51 emerging markets. Within a panel data estimation framew...

This paper uses the World Currency Unit framework of Ho (2000) to consider the feasibility and the benefits for a country to link its currency to the WCU. It also throws light on the workability of “global bonds” denominated in the WCU. Empirical data from Hong Kong, Japan, the United States, the UK, and South Korea are used. The data suggest that a real exchange rate concept that can be compar...

In 1999, eleven European countries formed the Economic and Monetary Union (EMU); they abandoned their national currencies and adopted a new common currency, the euro. Several recent papers argue that the introduction of the euro has led (by itself) to a sizable and statistically significant increase in trade between the member countries of EMU. In this paper, we put the trade effect of the euro...