The Resilience of Future Monetary Union in Emerging Countries to International Financial Shocks: A New Set of Banking and Financial Regional Criteria

Abstract

This survey presents an analysis that incorporates the lessons of the positive literature on the third generation of crises into the traditional optimum currency area theory to propose a new set of criteria that ensure better resilience of a monetary union to financial contagion. The study stresses the fact that new banking and financial criteria must be considered to protect integrated economies against common international financial shocks. The 2007 US liquidity crisis that spread into the Eurozone and generated a considerable economic slowdown validates these propositions. It underlines the insufficiency of the Maastricht criteria, which do not incorporate these measures and do not make it possible to anticipate or resorb the spread of international financial crisis. These considerations could be integrated into the future monetary union projects in emerging countries organised today in common markets and allow for the circumvention of the disastrous economic and social effects generated by the spread of financial crisis in the real sector of these economies.