Capital market imperfections and the theory of optimum currency areas
By: Pierre-Richard Agenor, Joshua Aizenman.
Contributors: Aizenman, Joshua.; National Bureau of Economic Research.
Series: NBER working paper series -- working paper 14088; Working paper series (National Bureau of Economic Research : Online) -- working paper no. 14088.
Publisher: National Bureau of Economic Research
Published: 2008
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Description: "This paper studies how capital market imperfections affect the welfare effects of forming a currency union.  The analysis considers a bank-only world where intermediaries compete in Cournot fashion and monitoring and state verification are costly.  The first part determines the credit market equilibrium and the optimal number of banks, prior to joining the union.  The second part discusses the benefits from joining a currency union.  A competition effect is identified and related to the added monitoring costs that banks may incur when operating outside their home country, through an argument akin to the Brander-Krugman "reciprocal dumping" model of bilateral trade.  Whether joining a union raises welfare of the home country is shown to depend on the relative strength of "investment creation" and "intermediation diversion" effects"--National Bureau of Economic Research web site.
Notes: Title from PDF file as viewed on 7/14/2008.

Includes bibliographical references.

Also available in print.

System requirements: Adobe Acrobat Reader.

Mode of access: World Wide Web.