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This study applies the Optimum Currency Area theory to find out whether or not Israel is an appropriate candidate for the European Monetary Union. In order to answer this question standard methods of measuring business cycle synchronization and bilateral trade intensity, the most challenging issues of joining a monetary union, are applied over a twenty nine year long time series. As a result of this analysis one should be able to provide a statement of whether Israel is, from an economic perspective, to be considered a potential candidate country or not. In other words, are the costs of joining the EMU higher than the benefits?

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Vincent Grunert is a PhD. student at the Vienna University of Economics and Business (WU). His research focuses on the application of financial econometric methodologies in Payments- and Securities Settlement Systems. He graduated from the University of Innsbruck with a degree in Political Economy.

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