De Grauwe, P. and W. Vanhaverbeke (1991), 'Is Europe an optimum currency area ?
An optimum currency area (OCA) is a region in which countries would be better off with a common currency or tightly fixed exchange rates than with floating exchange rates among themselves. An optimum currency area (OCA) can be defined as the optimal geographical area for a single currency, or for several currencies, whose exchange rates are irrevocably pegged.
The purpose of this thesis is to investigate whether Europe can be called an OCA or not. According to him, a currency area is feasible if … The single currency, or the pegged currencies, fluctuate jointly vis-à-vis other currencies.
This paper asks whether Europe is an optimum currency area. Wood (1973) related the issue of the formation of a currency union to the question of costs and benefits.
G.E. Evidence from regional data', CEPR Discussion Paper no. This is done by comparing the labour flexibility throughout Europe after certain macroeconomic shocks, which
The outcome is that the Euro zone is not an optimal currency area, despite major improvements seen following the introduction of the Euro in the areas including ….
Optimum Currency Area Theory: A currency thoery based on geographical area that adopts a fixed exchange rate regime or a single currency within its boundaries. The optimum-currency-area literature predicted that problems in a monetary union would mostly arise in the presence of asymmetric shocks, while it should have been easy to agree a common policy if shocks were symmetric. However, many claimed it failed in doing so. So the optimum currency area should include such countries in which the propensities to inflation are similar. etc .
It involves inspecting existing related literature and data for certain prerequisites set out by the Optimum Currency Area theory.
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Economic theory suggests that a common currency is more likely to be beneficial if coun try-specific shocks are mild and symmetric, whereas in the presence of major asymmetric shocks, floating exchange rates are more likely to be stabilizing.
Europe has been trying to form an optimum currency area (OCA) since the introduction of the euro.
Evidence … So optimum currency area theory was right to assert that creating a single currency would bring significant costs, which in turn meant that Europe’s lack of mitigating factors in the form of high labor mobility and/or fiscal integration became a very significant issue.