Exchange Rates and GDP: A literature review on monetary unions

Abstract

This work tries to give a perspective of how the adoption of the different monetary systems affects to world trade and the growth of the economies. Since the end of the use of the gold standard as a world monetary system the economies began to adopt flexible or fixed exchanges rates. In this work, we study the differences and effects on the economic performance between these two monetary systems according to the existing literature and membership in a system of monetary union. A review of the literature and the different facts presented in this work show that the use of flexible exchange rates together with the control of monetary and fiscal policies and the global integration through different organitizations and monetary unions has been crucial for the rise of world trade and economic growth. Our descriptive analysis also confirm the relevance of monetary unions during the last global crisis although they seem to be important for stability and growth in situations of global crisis, they have different effects depending on the initial situation of countries.