Towards North American Monetary Union

Many believe that Canada's deepening economic integration with the United States and the worldwide trend towards currency blocs will eventually lead to a North American monetary union. In the first detailed analysis of Canadian exchange rate politics, Eric Helleiner challenges this view.Helleiner finds little support in the US for the concessions that would be necessary to make a North American monetary union palatable in Canada. Comparing the US Federal Reserve and the European Monetary Union, he argues that Canada would exercise far less influence within a North American monetary union than individual countries do within the European community. He also analyses the seemingly paradoxical support of Quebec sovereignists for free trade and monetary union.Towards North American Monetary Union'explores Canada's unusually strong commitment throughout the twentieth century to a floating exchange rate for its national currency - a commitment that Heilleiner argues is likely to endure.

This study examines the major arguments for and against enhanced monetary integration in North America, with particular emphasis on the Canadian perspective. In this context, the question is whether the current floating rate regime should be replaced by greater fixity of exchange rates in relation to the U.S. dollar. While the choice among fixed rate systems is wide in priciple, for practical purposes the Canadian debate centres on the pros and cons of monetary union. Although much of the debate focuses on traditional concerns of macroeconomic stability and policy management, some observers suspect that the floating rate system has retarded the development of high tech manufacturing. The study reviews the core arguments for and against fixed rates and currency union; examines problems associated with nominal rigidities; and assesses the role of exchange rate regimes in the evolution of economic structure. It considers trade-offs among alternative exchange rate regimes, and takes up the political dimension of closer monetary cooperation.

Helleiner finds little support in the U.S. for the concessions that would be necessary to make a North American monetary union palatable in Canada. Comparing the U.S. Federal Reserve and the European Monetary Union, he argues that the influence of Canada within a North American monetary union would be far less than that of individual countries within the European community. He also considers the seemingly paradoxical support of Quebec sovereignists for free trade and monetary union.

Britain is confronted with the EU and its Economic and Monetary Union or the 'eurozone' an area of 12 EU Member States in which the Euro is the single currency. At a time in which the discussion revolves around the future of national currencies, this work looks at the question of monetary integration for the cases of Britain and Canada.

This paper considers the extent to which the North American Free Trade Area (NAFTA) meets the criteria for a common currency area. NAFTA is compared with the EC, a regional grouping for which initial plans for a monetary union are already in place. Most of the anticipated benefits from a monetary union in the EC apply with equal force to NAFTA. However, because the underlying disturbances are more diverse across members of NAFTA, the costs of abandoning the exchange rate instrument are likely to be higher. This is particularly true when NAFTA is compared to the EC’s continental core.