From the Firm to Economic Integration
- New Thinking in Political Economy series
Chapter 10: Can optimum currency areas be determined in Europe?
Trying to determine the “optimum” number of currencies in a given area – such as the European zone or the world – and to evaluate the desirable characteristics of these currencies is certainly an interesting problem from a purely intellectual point of view. But it is also important from a practical point of view, since many people wonder whether the eurozone can be considered as an optimal arrangement. In fact, it is quite common to hear people claim that the euro system will burst because of diverging economic conditions within the eurozone, or even that it ought to burst, which would mean that the eurozone is not an optimal currency area and that one may consider as more efficient to have a different – larger – choice of currencies in Europe. Therefore, the confidence many people had in the single currency may be decreasing, so it is important to try to evaluate the gains and costs of the single currency in Europe and to evaluate whether another monetary organization ought to be considered.
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