Social Welfare Effects of a Common Currency

摘要

This paper considers the possible social welfare consequences of replacing anational currency by a common currency, the ECU, managed by an--at least juridically--independent European Central Bank. A final replacement of national currencies imposes upon the national economy a European-wide interest rate/inflation rate, which could affect social welfare considerably if the EC is not an optimal currency area. Welfare gains from a final replacement of national currencies by the ECU result in the form of lower transaction and information costs. If the benefits from a common currency exceed the costs, a replacement of a national currency by a common currency is efficient. In the empirical part the structural parameters of the model are estimated for the EC countries to assess whether currently a replacement of their national currency by a common currency is efficient or not.