Jakub FRYDRYCH; Stanislav BURIAN

doi:10.1515/saeb-2017-0012

Authors

Jakub FRYDRYCH
Stanislav BURIAN

DOI:

https://doi.org/10.1515/saeb-2017-0012

Keywords:

EMU, OCA index, convergence, monetary policy, optimum currency area

Abstract

This paper evaluates the European monetary convergence for period 2001 and 2013. The main purpose of this contribution is the estimation of the so-called OCA index, which indicates the proximity of two economic areas. The paper is theoretically based mainly on the research of Bayoumi, Eichengreen (1997) and Horváth, Komárek (2003). Selection and calculation of variables precedes the econometric analysis, and those variables correspond to the basic characteristics of an optimum currency area. Although the estimated model fulfills the conditions of economic and econometric verifications, its explanatory capabilities are significantly reduced due to the limited set of input data. Results of the analysis point to relatively stable values of indices in the period, but their further examination of the development in time reveals a steady deterioration in the case of almost all economies.

JEL Codes - E42, F33

References

Achsani, N., and Partisiwi, T., 2010. Testing the Feasibility of ASEAN 3 Single Currency Comparing Optimum Currency Area and Clustering Approach. International Research Journal of Finance and Economics, 37, 79-84.

Bangake, C., 2008. Exchange rate volatility and optimum currency area: Evidence from Africa. Economic Bulletin, 6(12), 1-10.

Bayoumi, T., and Eichengreen, B., 1997. Ever Closer to Heaven? An Optimum-Currency-Area Index for European Countries. European Economic Review, 41(3-5), 761-770. doi: http://dx.doi.org/10.1016/S0014-2921(97)00035-4

Cincibuch, M., and Vávra, D., 2000. Na cestě do EMU: Potřebujeme flexibilní měnový kurz? Finance a úvěr, 6, 361-384.

Fidrmuc, J., 2002. The Endogeneity of the Optimum Currency Area Criteria, Intraindustry Trade, and EMU Enlargement. BOFIT Discussion Paper(106), 5-27.

Hedija, V., 2011. Index OCA – aplikace na země EU10. Ekonomická revue, 14(2), 85-93.

Horváth, R., and Komárek, L., 2003. Optimum currency area indices: evidence from the 1990s. Warwick economic research papers(665).

Kenen, P., 1969. The Theory of Optimum Currency Areas: An Eclectic View. In R. Mundel and A. Swoboda (Eds.), Monetary Problems in the International Economy (pp. 41-60). Chicago: University of Chicago Press.

McKinnon, R., 1963. Optimum Currency Areas. The American Economic Review, 53, 717-725.

Mongelli, F. P., 2002. New Views on the Optimum Currency Area Theory: What is EMU Telling Us? ECB Working paper(138).

Mundell, R., 1961. A Theory of Optimum Currency Areas. American Economic Review, 51(4), 657-665.

Ogawa, E., and Kawasaki, K., 2007. East Asian currency cooperation. Japan.

Skořepa, M., 2011. A convergence-sensitive optimum-currency-area index. IES Working Pape, 23(34).

Skořepa, M., 2013. Troubles in the Euro Area Periphery: The View through the Lens of a Simple Convergence Sensitive Optimum Currency Area Index. Finance a úvěr, 63(2), 129-151.

Vieira, C., and Vieira, I., 2010. Assessing the Endogeneity of OCA Condition in EMU. Manchester School, 80, 77-91. doi: http://dx.doi.org/10.1111/j.1467-9957.2012.02321.x

Volz, U., 2010. The Standard Approach: The theory of Optimum Currency Areas. Prospects for monetary cooperation and integration in East Asia. USA: Massachusetts Institute of Technology.