Download or read book A Formal Model of Optimum Currency Areas written by Mr.Tamim Bayoumi and published by International Monetary Fund. This book was released on 1994-04-01 with total page 22 pages. Available in PDF, EPUB and Kindle. Book excerpt: A model of optimum currency areas is presented using a general equilibrium model with regionally differentiated goods. The choice of a currency union depends upon the size of the underlying disturbances, the correlation between these disturbances, the costs of transactions across currencies, factor mobility across regions, and the interrelationships between demand for different goods. It is found that, while a currency union can raise the welfare of the regions within the union, it unambiguously lowers welfare for those outside the union.