Optimal Currency Areas

Abstract

As the number of independent countries increases and their economies become more integrated, we would expect to observe more multi-country currency unions. This paper explores the pros and cons for different countries to adopt as an anchor the dollar, the euro, or the yen. Although there appear to be reasonably well-defined euro and dollar areas, there does not seem to be a yen area. We also address the question of how trade and co-movements of outputs and prices would respond to the formation of a currency union. This response is important because the decision of a country to join a union would depend on how the union affects trade and co-movements. AbstractAs the number of independent countries increases and their economies become more integrated, we would expect to observe more multi-country currency unions. This paper explores the pros and cons for different countries to adopt as an anchor the dollar, the euro, or the yen. Although there appear to be reasonably well-defined euro and dollar areas, there does not seem to be a yen area. We also address the question of how trade and co-movements of outputs and prices would respond to the formation of a currency union. This response is important because the decision of a country to join a union would depend on how the union affects trade and co-movements.

Corporate taxes and the location of intangible assets within multinational firms

“…Furthermore, a substantial fraction (44.8%) of the subsidiaries in our dataset does not hold any intangible assets at all and thus, we follow previous studies (e.g. Plassmann and Tideman, 2001;Alesina et al, 2002;Hilary and Lennox, 2005;Weichenrieder, 2008) and add a small constant (= 1) to our intangibles variable to avoid that zero-observations are excluded from the estimation. The explanatory variable of central interest is τ it which stands the subsidiary's statutory corporate tax rate difference to all other affiliates of the multinational group (that are owned with at least 90% of the ownership shares) including the parent.…”

Do governments tax agglomeration rents?

“…To avoid losing observations with non-positive values, we follow previous studies (e.g. Alesina, Barro, and Tenreyro (2002)) and define the logarithm of the distance to the variable's minimum value plus a small constant. Formally, log U r it is thus defined as log U r it = log[U r it + min(U r it ) + η], with η being a small positive constant.…”

The Real Effects of Financial Integration

“…vanWincoop (2001) or Kalemli-Ozcan, Sorensen and Yosha (2001) document a signiÞ-cant impact of specialization patterns, as economies with the same sectors tend to be subjected to similar shocks. Alesina, Barro and Tenreyro (2002) or Rose (2000) stress the importance of currency unions, working indirectly via increased trade. Finally, Imbs (2004) assesses the relative magnitude of these channels going both directly and indirectly from trade integration, specialization and Þnancial integration to business cycles synchronization.…”