Currency Unions in Prospect and Retrospect

Posted: 18 Oct 2010

See all articles by J. M.C. Santos Silva

J. M.C. Santos Silva

University of Surrey

Silvana Tenreyro

London School of Economics (LSE)

Multiple version iconThere are 2 versions of this paper

Date Written: February 2010


We critically review the recent literature on currency unions and discuss the methodological challenges posed by the empirical assessment of their costs and benefits. In the process, we provide evidence on the economic effects of the euro. In particular, and in contrast with estimates of the trade effect of other currency unions, we find that the euro's impact on trade has been close to zero. After reviewing the costs and benefits of joining a currency union, we conclude with some open questions on normative and positive aspects of the theory of currency unions, emphasizing the need for a unified welfare-based framework to weigh their costs and gains.

Suggested Citation

Santos Silva, João M.C and Tenreyro, Silvana, Currency Unions in Prospect and Retrospect (February 2010). Annual Review of Economics, Vol. 2, pp. 51-74, 2010, Available at SSRN: or

João M.C Santos Silva (Contact Author)

University of Surrey ( email )

Surrey GU2 7XH
United Kingdom

Silvana Tenreyro

London School of Economics (LSE) ( email )

Houghton Street
London WC2A 2AE
United Kingdom

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