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Optimum Currency Area (Optimum Currency Area criteria (Labor Mobility…
Optimum Currency Area
Optimum Currency Area criteria
Labor Mobility (Mundell) - increase of labor mobility on the OCA
Production diversification (Kenen) - similar goods producing structure
Openness (McKinnon)
Fiscal transfers - compensating from adverse shocks
Homogeneous preferences - in consensus of how to deal with shocks
Solidarity
Is Europe a Eurozone?
Labor mobility - No
Trade openness - Yes
Product diversification - Yes
Fiscal transfers - No
Why is large currency area desirable?
No convertation of currency
Avoid risk of exchange rate fluctuations
Prevents economic shocks
Adverse shock
Asymmetric shock
Symmetric shock with asymmetric effect
Eurozone
Is Italy going to leave Eurozone?
Why Britain does not accept euro?
Effects of asymmetric shocks on Europe and the USA