 Is Europe an Optimum Currency Area?Chapter 8 in The European Community after 1992, 1992, pp 138-161 from Palgrave Macmillan Abstract: Abstract An optimum currency area (OCA) is an economic unit composed of regions affected symmetrically by disturbances and between which labour and other factors of production flow freely (Mundell, 1961). Insofar as regions within the OCA experience the same shocks, there is no obvious advantage to altering relative prices between them. Insofar as localized concentrations of unemployment nonetheless remain, the free mobility of labour from high- to low-unemployment regions can eliminate the problem. It is hence optimal to dispense with one of the principal instruments — changes in the exchange rate — traditionally used to effect relative price adjustments, and to reap the benefits, in terms of convenience and efficiency, of a common currency. Keywords: Exchange Rate; Real Exchange Rate; Share Price; Unemployment Insurance; Labour Mobility (search for similar items in EconPapers) There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it. Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-1-349-12048-2_8 Ordering information: This item can be ordered from DOI: 10.1007/978-1-349-12048-2_8 Access Statistics for this chapter More chapters in Palgrave Macmillan Books from Palgrave Macmillan |
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