Economic Interdependence, Colonial Legacies and the Likelihood of Monetary Cooperation
Year: 2011
Type: preprint
Abstract: Political scientists studying regional monetary cooperation have focused much attention on the extraordinary Western European efforts leading up to the creation of the Euro, but there have been many other regional projects involving monetary cooperation in the postwar era. These range from full-fledged currency unions like the West African franc zone and the former Soviet ruble zone to payments arrangements like the Central American Clearing House. In fact, since 1960 almost every region of the world has attempted or discussed monetary cooperation in some form.I argue that the strongest explanation for observed regional monetary cooperation is in previous institutional legacies, especially colonial legacies. The establishment of regional currency institutions in colonial times has a powerful effect on post-independence cooperation. Earlier institutions create powerful reinforcing effects that make later, post-independence cooperation more likely. While many colonial monetary institutions did not lead to later cooperation, the persistence of so many of these institutions suggests the need for additional study of how regional monetary institutions change incrementally over time.I show that levels of regional economic interdependence are only weakly related to observed patterns of regional monetary cooperation. In fact, many of the most successful efforts at monetary cooperation occur in the least interdependent regions. Taken together, these results demonstrate that economic explanations for currency cooperation are most useful when combined with careful analysis of institutional legacies.
Source: SSRN Electronic Journal
Author: Scott Cooper
Institution: Brigham Young University
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2163509567