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An optimal currency area. Consider a number of countries and call them a region.

Ppt Convergence Criteria And European Financial Crisis

Designed as such the eurozone is not currently operating as an optimal currency area.

Is the eurozone an optimal currency area. The paper then moves on to examine some key comparisons that can be made between. Eurozone countries matched some of mundell s criteria for. The economic monetary union must consider taking action in many areas to ensure that the euro zone satisfies the prerequisites laid out by the optimal currency area theory in order to be classed as a optimal currency area.

If these countries experience similar macroeconomic shocks and if there s labor mobility between these countries this region may be an oca. An optimal currency area is often larger than a country. An optimal currency area theory was for the first time developed by robert mundell in a theory of optimum currency areas september 1961.

Does euro zone fit what is described in the literature as an optimal currency area. The ultimate conclusion is that the euro zone is not an optimal currency area albeit significant advancements towards it were made past the introduction of the euro in terms of inflation convergence financial integration and intra trade intensification. Care is taken to explain the criteria for an optimal currency area and the eurozone s status in regards to each of these applicable criteria.

Overall it is safe to conclude that the euro zone is not an optimal currency area. The optimal currency area oca theory had its primary test with the introduction of the euro as a common currency across european nations. For him the optimum currency area is the region and not the na tion and he strikes the vital importance of a.

The euro raises issues addressed by a theory known as the optimum currency area oca theory. The main idea was to define until what extent some countries ez countries. For instance part of the rationale behind the creation of the euro is that the individual countries of europe do not each form an optimal currency area but that europe as a whole does.

Martina fürrutter 02 2012 which exchange rates are fixed ó2 he was the first to question the appropriate domain of a currency area however.