Israel and the EMU

This study applies the Optimum Currency Area theory to find out whether or not Israel is an appropriate candidate for the European Monetary Union. In order to answer this question standard methods of measuring business cycle synchronization and bilateral trade intensity, the most challenging issues of joining a monetary union, are applied over a twenty nine year long time series. As a result of this analysis one should be able to provide a statement of whether Israel is, from an economic perspective, to be considered a potential candidate country or not. In other words, are the costs of joining the EMU higher than the benefits?