Louisa Grimm

Dec 8, 2024 | onlinelibrary.wiley.com | Frank Westermann |Louisa Grimm |Sven Steinkamp

1 Introduction In the empirical literature on optimum currency areas, the most common approach has first been used in the classical article by Bayoumi and Eichengreen (1993). The authors conduct a trend-cycle decomposition and analyse the contemporaneous correlation of short-term shocks, interpreted as demand shocks.1 The approach draws its intuition from Mundell's (1961) work on optimum currency areas and it has more recently been formally illustrated by Berger, Jensen, and Schjelderup (2001).