Empirical Research On The Theory Of Optimum Currency Area--Case Study On EMU

The theory of Optimum Currency Area (OCA) is one of the most important topics of international monetary economics. The European Economic and Monetary Union (EMU) is the most important example of recently established currency unions and the one to which the OCA theory has been most frequently applied.Based on the OCA theory, this thesis focuses on two main topics in the evolution of EMU: (1) Is Euro area an OCA? (Which countries or areas should form a monetary union?); (2) The enlargement of the Euro area. (Where is the border of a monetary union? / Is the monetary union the bigger the better?) We reach two conclusions in the end. First, the Euro area is an OCA. Second, although there are no obstacles in the EU rules that can prevent the Central and Eastern European Countries (CEEC) from joining the Euro area, the enlargement of the Euro area should be prudent.Chapter one surveys the literature on the OCA theory. It is organized into three main phases, each of which has its distinct attributes. The early (conventional) phase puts forward the OCA theory and its properties. In the reassessment phase, the diverse facets of the theory were combined, which led to the new OCA theory. And during the empirical phase, the theory was subject to due empirical scrutiny.In chapter two, we apply some new analytical tools to demonstrating that the Euro area is an OCA. Comparing with other areas in the world, the present twelve member countries of the Euro area have similar economic development level and product structure; The degree of economic openness of these countries are all high; The mobility of labor and other factors of production in this area is better than most areas in the world. And the business-cycle approach proves that the business cycles of those twelve number countries show high-level correlation. In a word, the Euro area meets some main properties of an OCA. The benefits of the number countries joining the Euro area far more outweigh the costs. So we deem the Euro area as an OCA, which also demonstrates by its functioning for more than five years.Chapter three discusses the enlargement of the Euro area. Although there is no timetable, CEEC that just join the EU can be a member of the Euro area without obstacles in the EU or EMU rules. We analyze the present convergence situation of the CEEC and the likely route for them to join the Euro area. Meanwhile, the economic gap between the CEEC and the "old" member countries is enormous. And the present European monetary and fiscal policy cannot satisfy an "enlarged" Euro area. We hold that too early acceptance for CEEC will bring shocks to both "old" and "new" members, and not accord with the long-term interests of the Euro area.We draw the conclusion in chapter four, and discuss the possibility of the eastern Asia monetary integration.