This paper examines the link between currency areas and customs unions. The size of a bloc of countries practicing some form of co-ordination of monetary policy is limited by the incentive to free-ride that formation of the bloc creates. However, when the threat of a trade war is introduced, the...

While virtually all currency crisismodels recognise that the fate of a currency peg depends on how tenaciously policy makers defend it, they seldom model how this is done. We incorporate themechanics of speculation and the interest rate defence against it in the model ofMorris and Shin (American...