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Monetary Integration and Dollarization

No Panacea

Edited by Matías Vernengo

This book deals with the economic consequences of monetary integration, which has long been dominated by the Optimal Currency Area (OCA) paradigm. In this model, money is perceived as having developed from a private sector cost minimization process to facilitate transactions. Not surprisingly, the book argues, the main advantage of monetary integration in the OCA context is the reduction of transaction costs, yet the validity of OCA to analyze processes of monetary integration seems to be limited at best.
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Chapter 6: Is the Canadian Dollar Destined to Disappear? A Critical Perspective

Mario Seccareccia


Mario Seccareccia INTRODUCTION By a vote of 175 to 67, in March 1999, Canada’s House of Commons rejected a motion to study the creation of a North American monetary union and, thereby, eventually scrap the Canadian dollar. To my knowledge, this was the first time in almost 150 years since the adoption of the Canadian dollar in 1854 that such an idea had been entertained by the Canadian parliament (see Powell, 1999). Although the Bloc Québécois, a party that advocates Quebec’s secession from the Canadian federation, had introduced the motion, primarily conservative members of parliament had supported the proposal. As expected, however, the governing Liberal Party together with the social-democratic New Democratic Party easily defeated the motion. Not unlike the debate during the late 1980s over the Canadian–US Free Trade Agreement (FTA), a sharp cleavage emerged politically in Canada. The traditional Left and Centre of the political spectrum was unanimously opposed to the notion of abandoning Canada’s national currency. On the other hand, the political Right, the Tories and the then Canadian Alliance, together with the Quebec sovereigntists (who tend broadly to be situated to the left of the Canadian political spectrum) showed interest in forging stronger institutional links with the United States and entertaining the idea of a common currency. This was so despite the fact that the Bloc and the conservative members of Canada’s parliament had widely different long-term political interests in supporting such policy of increased North American monetary integration. For instance, the Quebec...

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