"The European Community as an Optimum Currency Area"

Overturf, Stephen. (1993) "The European Community as an Optimum Currency Area". In: UNSPECIFIED, Washington, DC. (Unpublished)

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Abstract

This paper reexamines and extends the concept of openness as a criterion for optimal currency areas to the European Community. The results from theoretical representation and empirical analysis speak to the value of the openness criterion as important in the degree to which EC countries allow their rates to vary within the confines of the European Monetary System. An extension of the theory allows for the conclusion that countries will be less inclined to use exchange rate changes with their larger trading partners. This gives, in turn, a standard countries might use to manage their adjustment policies with individual nations. Empirical examination of the EC yields country groupings among smaller northern European countries, and also helps to explain why Germany might be willing to consider economic and monetary union.

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