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Essays on currency unions and the international monetary system in historical perspective

Vicquéry, Roger H. (2021) Essays on currency unions and the international monetary system in historical perspective. PhD thesis, London School of Economics and Political Science.

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This thesis contributes to the empirical literature on currency unions and the international monetary system, as well as to the economic history of the Italian unification. The first essay relies on the Italian unification as a unique exogenous variation to the membership of a currency union, looking at the closest historical predecessor to the Euro. This allows me to estimate a causal common currency effect on trade. Relying on original bilateral trade data and structural gravity equations, I estimate a causal common currency effect in the order of 35%. This is notably smaller than the average point estimate in the literature. However, my findings corroborate the original policy implications of Rose (2000) in a quasi-experimental setting. The second essay revisits the optimum currency areas (OCA) framework and its endogeneity, looking at a large wave of European monetary integration occurring in the third quarter of the 19th century, ranging from the Italian unification to the gold standard. I find patterns of ex-ante OCA criteria consistent with the predictive power of the OCA framework, and at odds with their endogeneity hypothesis formulated by Frankel and Rose (1998). Focusing on the Italian unification, I find evidence in line with the pessimistic view of OCA endogeneity of Krugman (2001). I explore to what extent these findings speak to patterns of post-unification regional divergence in Italy. The third essay measures the rise and fall of global currencies and the structure of the international monetary system (IMS) over two centuries, relying on a new monthly and weekly dataset of foreign-exchange returns going back to 1820 and the Frankel and Wei (1994) factor model. I show that, from a two centuries perspective, the current dollar hegemony is a historical anomaly. I furthermore find preliminary evidence consistent with a positive relationship between the intensity of competition among global currencies and the prevalence of global financial turbulence, in line with the recent theoretical contribution of Farhi and Maggiori (2018).

Item Type: Thesis (PhD)
Additional Information: © 2021 Roger H. Vicquéry
Library of Congress subject classification: H Social Sciences > HC Economic History and Conditions
H Social Sciences > HG Finance
Sets: Departments > Economic History
Supervisor: Roses, Joan R.

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