Modeling the Stabilization Factors of Monetary Unions in Turbulent Economics

Abstract

Traditionally motivation to create monetary unions is considered in the frames of two advantages: (1) reduction of currency conversion losses and gradual adjustment of discrepancies in relative prices caused by fluctuations of the nominal exchange rate; lower transaction costs and greater predictability of integrated commodity and financial markets; (2) potential ability to “discipline” political initiatives through membership in the monetary union. The main argument against the monetary union is the loss of autonomy in monetary policy to satisfy the needs of the state. This paper presents empirical testing of the hypothesis about the stabilizing nature of the monetary integration processes including the post-crisis period (due to the influence of membership on the level of inflation and real interest rates). It also analyses the annual growth rates of GDP and GDP per capita, as well as the average annual growth of exports in conditions of a monetary union, in order to assess the dynamics of the overall progress of currency integration. In contrast to the previous researches in such manner, the paper analyse the database in the post-crisis environment that is determined by the new economic paradigm.

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