Why do countries join an EMU (economic and monetary union)?

To answer this question, it would be useful to start by dissertateing the basic guess of such a essence, before continuing to plow the costs and benefits of being in such a union. This moment be the crux of our answer to the question, since countries are assumed to be rational actors that would act only if the benefits of joining an EMU outweighed the costs. end-to-end the essay, many examples will be drawn from the EU, which is the best functional example of such a union. Definition and Theoretical Beginnings An stinting and pecuniary union can be defined as hit market with a common currency. It involves a high floor of integration than a currency union e.g. the Latin monetary Union in the 1800s which did not call for a adept market. The EMU may be said to be the fifth map of economic integration according to the theory of the Magyar economist Béla Balassa, which ranks institutions by head of integration, the introductory being preferential peck areas, followe d by submit trade areas, customs union, common markets and then EMU; the finis stage in this theory is complete economic integration. The cerebration of a highly integrated economic and currency union is base on the theory of Optimal Currency Areas (OCA) that was basic authentic by an American economist Robert Mundell.

In his theory, Mundell claims that ii countries should desegregate their currencies if two criteria are satisfied: firstly, countries must(prenominal) be economically similar. In such circumstances, if they faced correlated exogenous shocks, e.g. 2 oil exporters facing the rise of oil prices, the postulate response s would be similar, and therefore having ind! ependent policies would be superfluous. Secondly, labour must be highly mobile between countries. For instance, if Texas tried to officiate a separate monetary policy from the rest of... If you pauperism to halt a full essay, order it on our website: BestEssayCheap.com

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