Wednesday, February 15, 2006

Economic impact of currency union

The political impetus for Canada's adoption of a currency union with the United States rests on the cost/benefit analysis of economists who must provide the necessary backbone for political voices. They must produce convincing arguments about the effects of currency union on the Canadian economy. In the end, the question will come to Canadians: is it acceptable to give up monetary autonomy? An affirmative answer will depend on the economic return, the degree to which Canadian industry thrives and adapts to the move away from a flexible exchange rate - the currency regime in place now. Indeed, there would be winners and losers across the diverse Canadian economic sphere, but the heightened level of economic integration between the two countries has now put the balance toward currency union.
One study that looks at this matter concludes that we are much nearer to meeting the conditions necessary for optimal currency union, although it does not expressly prescribe union. Have a look at this case study:
This kind of academic study is an important starting point, and I would expect to find more analysis in the coming years.

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