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This work contributes to the literature in international macroeconomics, focusing on two important aspects: currency unions and growth. First,we develop a theoretical model that is able to capture some of the factors that are characterizing the trade between developed and developing countries and their growth regimes. Second, we consider two main macroeconomic costs and benefits predicted by the theory of Optimum Currency Areas: i) the business-cycle correlation between the candidate´s economy and that of the currency zone as a whole; ii) the candidate economy´s enhanced price stability. The results provide empirical evidence of the existence of several optimal currency areas in the world. In particular, in several areas, such as Europe, the Middle-East, Africa, the Commonwealth of Independent States and Mongolia, the creation of a common currency union is beneficial.Another important element to foster growth, besides trade and monetary integration, is macroeconomic stability. We present theoretical and empirical evidence showing that the relation between volatility and average long-run growth is robustly negative.

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Davide Furceri is economist at the International Monetary Fund. He holds a Ph.D. in Economics from the University of Illinois and from the University of Palermo. He previously worked as economist at the ECB and at the OECD. He extensively published in international journals in the area of macroeconomics.

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