CONSIDERATION RELATING THE THEORETICAL AND PRACTICAL FRAMEWORK OF THE MONETARY UNION

Mercea Handro Patricia Amalia
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Mercea Handro Patricia Amalia: DOCTORAL SCHOOL OF ECONOMIC SCIENCES CRAIOVA

Annals - Economy Series, 2018, vol. SPECIAL, 234-239

Abstract: For the first time in economic theory, the canadian economist Robert Mundel (1961)signaled the fact that countries with close trade links and with similar economic cycles could benefit major advantages using a common currency by reducing transaction costs and eliminating currency risk. Labor mobility within the region, and active policies of the government to create jobs where unemployment is high, can be a substitute for quitting floating exchange rate and loss of the right to set interest rate level allowed by independent monetary policy. Mundell says that in addition, when economic cycles are not perfect aligned and common monetary policy can not act with the same intensity stabilizing across the region, there must be set up mechanisms for fiscal transfers: collection of fees from an area of growth and their transfer in an area in recession. The idea of a single coin for Europe began to emerge in 1979 when the European Monetary System was founded. Subsequently, in 1999, euro, the single currency of the euro area for eleven European Member States at that time, was launched. The concept of Mundell has literally become the starting point for a new field of research, the problem of forming an optimum currency area has been seen as a new theoretical basis for adjustments to asymmetric shocks, ie to exogenous factors that produce significant disturbances within a region or countries.

Keywords: The optimum currency areas; Monetary system; Fix exchange rate; Floating exchange; Exogenous shockse (search for similar items in EconPapers)
Date: 2018
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