01946cas a2200241 a 4500 AALejournalIMF003208 230101c9999 xx r poo 0 0eng d 5.00 USD 9781451875294 1018-5941 BD-DhAAL BD-DhAAL Yehoue, Etienne. Currency Bloc Formation as a Dynamic Process Based on Trade Network Externalities / Etienne Yehoue. Washington, D.C. : International Monetary Fund, 2004. 1 online resource (35 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students The recent experience of the European Economic and Monetary Union (EMU) has stimulated the debate over currency union and reinforced the incentive for the emergence of currency blocs in other regions of the world. This paper builds a dynamic stochastic model-based on network externalities operating through trade channels-to explain the emergence of currency blocs, and specifically, why some countries join a currency union earlier than others. The paper develops and formalizes the intuition that currency bloc formation is path dependent, and that countries join currency blocs sooner the more they trade with the bloc member countries, with each additional member serving in a dynamic way to attract more members into the bloc. Evidence from the current pattern of EMU expansion supports the model, which is later used to elaborate on the pattern of further expansion of the union. Mode of access: Internet IMF Working Papers; Working Paper ; No. 2004/222 Full text available on IMF http://elibrary.imf.org/view/journals/001/2004/222/001.2004.issue-222-en.xml IMF e-Library