Contrary to what happened in the Seventies, when the parallel currency approach to monetary integration in Europe turned out to be the winning strategy to assist the political decision by Germany and France to revitalize an agonizing integration process, a similar proposal officially made by the...

Two seemingly unconnected empirical results suggest an intriguing mechanism. First, economic integration helps harmonize prices internationally, with trade being the primary channel (Rogoff 1996, Goldberg and Knetter 1997). Second, monetary union may greatly increase the amount of trade among...