BIS Review 150/2009  1  •  mobile factors of production.2  However this argument is very static. Joining a currency area leads to a boost in trade and hence to a convergence of business cycles. Moreover, in the current environment, the question of how costly idiosyncratic shocks can become are of minor importance.
The crisis is a shock that has affected all economies. The past ten years have shown that the introduction of a single currency ensured price stability and spurred trade flows over the region. To put it in the words of Richard Baldwin3 “Most of the trade effect literature treats currency unions as magic wand. The only question is: How big is the magic?