Wealth by Association

European monetary unification has produced a $15 trillion windfall to its member nations that is rarely discussed or accounted for in analyses of economic integration. Edmunds and Marthinsen argue that the reduction in cross-border risks—foreign exchange uncertainty, inflation differentials, competitive devaluations, and protectionism in financial services, among other—is directly responsible for an explosion in the value of fixed income assets and share prices. They explain how this wealth accumulation began to accrue even before the Euro was formally adopted. Could the same thing happen in Latin America or Asia?

Elegantly written and cogently argued, this book explores the ramifications of currency unification for each region in three scenarios: partial unification, dollarization, and full unification. The authors compute the increases in wealth created by these various levels of currency unification, provide spreadsheet models that examine the connections between the growth of financial wealth and real economic growth, and emphasize differentials in economic wealth among regions with time series maps that resize nations according to equity markets rather than geography.

JOHN C. EDMUNDS is Director of the Stephen D. Cutler Investment Management Center at Babson College. He is also on the faculty of the Arthur D. Little School of Management in Chestnut Hill, Massachusetts./e He was chairman of the finance faculty at Babson College from 1998 to 2000. Prior to 1993, he was Professor of Capital Markets at Instituto de Empresa in Madrid, where he was the first holder of a chair funded by Asesores Bursatiles, a leading Spanish securities firm. He has lived in six countries and spent 18 years abroad. He is fluent in Spanish and also speaks French. The author of The Wealthy World (2001), he is interested in capital markets, international finance, derivatives, and emerging markets.

JOHN E. MARTHINSEN is the Distinguished Chair in Swiss Economics of the Glavin Center for Global Entrepreneurial Leadership at Babson College. His main areas of interest are international finance, global macroeconomic analysis, and risk management. The winner of numerous distinguished teaching awards, he also served as Chairman of the Economics Division from 1992 to 1998. He has lived and worked extensively in Switzerland, and he has a wide range of consulting experience working for both domestic and international corporations as well as in the public sector. He is the co-author of Switzerland: A Guide to the Capital and Money Markets (1996) and Entrepreneurship, Productivity, and the Freedom of Information Act (1984).