The shrinking endogeneity of optimum currency areas criteria: Evidence from the European Monetary Union-A beta regression approach

The endogeneity of optimum currency area criteria has been widely studied. Literature suggests the existence of a positive relationship between trade intensity and business cycle correlation. Using a beta regression model for the Eurozone we have concluded that trade has a decreasing marginal effect on business cycle correlation.

► We model business cycle correlation and trade intensity in the Eurozone. ► We use a beta regression approach. ► The results confirmed the endogeneity of optimum currency areas. ► However, trade has a decreasing marginal effect on business cycle correlation.