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Monday, September 23, 2019

What are the main benefits and costs of monetary union What are the Essay

What are the main benefits and costs of monetary union What are the main criteria for the optimality of a currency area - Essay Example Thus it eliminates a big hurdle in the way of trade. At the same time, countries get free from any exchange rate uncertainty; get smaller rates of transactions and more secure price transparency. A neutral body acts as central bank on behalf of all member nations of the monetary union. This body being neutral and free from influence of any nation makes it credible for not only all members of the monetary union, but also for outside world. For example, European Central Bank acts as a combined central bank of the European Union. Monetary union is the way of promoting greater economic alliance which is beneficial for all member states and the outside world. For example, it is easy today to deal with a group of 28 countries of Europe at a single platform named European Union. Optimal currency area is also known as optimal currency region. This area refers to single market areas having a single currency across the region. There are many elements that define the optimality of a currency area (Alexandre Swoboda, 1999). It is important to have these elements to become the member of an optimal currency area. So following is the main criteria for the optimality of a currency area: (University of North Carolina,

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