Do monetary unions make economic sense? Evidence from the Scandinavian Currency Union, 1873-1913

Popular propositions as to what constitutes a successful single currency ar ea are examined by looking at the Scandinavian Currency Union (1873-1913) f ormed by Denmark, Norway and Sweden. Applying a frequently used indicator o f the desirability of monetary union, we study the symmetry of country-spec ific structural shocks (measured net of the non-Scandinavian influence) in these three countries. It is found that country-specific shocks are not hig hly symmetric. This conclusion is also supported by the absence of clear-cu t differences between the pattern of structural shocks in Belgium and struc tural shocks in the Scandinavian countries. This suggests that the three Sc andinavian countries did not form an optimum currency area during the perio d 1873-1913. JEL classification: F15; F33; N13.