Currency Unions FAQ
If you have found these pages useful, or have any requests, please e-mail me.
José de Sousa
● How do we create a bilateral currency union dummy à la Rose?
● Why do we use the term "country"?
● What is the ISO3 alphanumeric code of countries?
● How do we define a multinational currency?
● How do we define a currency union?
● What do we mean by "transitive" currency union?
● How many bilateral relationships share a common currency per year in the sample?
● Who is using these files?
● How do we create a
bilateral currency union dummy à la Rose?
Copy all the files into the same folder. Then, run mastercu.do.
Why do we use the term "country"?
The term country is used for convenience but some areas covered are not countries in the conventional sense of the word. "Colonies (e.g., Bermuda), territories (e.g., Guam), overseas departments (e.g., Guadeloupe), countries that gained their independence (e.g., Guinea-Bissau), and so forth are all included" (GR, 2002, 1128).
What is the ISO3 alphanumeric code of
The International Organization for Standardization (ISO) defines three-letter country codes for the names of countries. Here is the current list.
How do we define a
A multinational currency is used at least in two countries.
• I identify twenty multinational currencies based on the currency unions tabulated in the Appendix B of Glick and
Rose (2002, 1141-1149) from 1948 through 1997.
• A country may use simultaneously various multinational currencies. The code allows for this multi-use.
• Glick and Rose identify "16 switches into and 130 switches out of currency unions (for which we have data)".
"Switches into a currency union" means that a country uses a new multinational currency. I was able to identify
13 "switches into" out of the 16 mentioned. These switches into are not tabulated in Appendix B but reported in
• I also include a number of countries which are quite integrated to others in a way that independent trade data
could be unavailable. Some of these countries are not tabulated in GR's Appendix B but mentioned in
Footnote 9, p. 1129.
• I also add the Euro currency which was introduced to world financial markets as an accounting currency on 1st
January 1999, i.e. after the sample period of Glick and Rose. My sample covers the period from 1948 to 2015.
How do we define a currency union?
According to Rose (2006) For The New Palgrave: "Currency unions (also known as monetary unions) are groups of countries that share a single money."
We identify three kinds of currency unions:
1) "Bilateral" currency unions which "commonly occur when a small and/or poor country unilaterally adopts the
money of a larger, richer `anchor' country" (Rose, 2006).
2) "Multilateral currency unions between countries of more or less equal size and wealth." (Rose, 2006)
Moreover, following Glick and Rose (EER, 2002). A revised draft is available as a PDF file
3) "Money was interchangeable between the two countries at a 1:1 par for an extended period of time, so that there
was no need to convert prices when trading between a pair of countries."
What do we mean by
"transitive" currency union?
Glick and Rose (2002) define two currency unions: CUSTRICT: Strict Currency Union (see Appendix 2) and CUMED: Strict or inferred (from Transitivity) Currency Union. In their paper, they use the CUMED version. "Our definition of currency union is transitive; if country-pairs x–y, and x–z are in currency unions, then y–z is a currency union." (2002: 1129). Our code allows for such transitivity.
How many bilateral relationships share a common currency per year in the sample?
See here a table.
Who is using these files?
• Keith Head, Thierry Mayer and John Ries "The erosion of colonial trade linkages after independence", Journal of International Economics 81(1): 1-14.
• Keith Head and John Ries (2010), "Do trade missions increase trade?" , Canadian Journal of Economics 43(3): 754-775.
• Mathieu Couttenier and Rapahel Soubeyran (2011), "Diplomatic Intervention in Civil War : Trade for All or Trade for One ?"
• Vincent Vicard and Emmanuelle Lavalléee (2010), "National borders matter...where one draws the lines too".
• Pao-Li Chang - Singapore Management University
If you find these files useful, I would appreciate knowing who you are.