چکیده:
The issue of whether a nation increases its welfare by
relinquishing its national currency and adopting some currency
of a wider area leads us to analyse costs and benefits of having
one currency. The costs of a monetary union derive from
relinquishing an instrument of economic policy. The most
benefits of a monetary union detive from the elimination of risk
coming from the uncertain future movements of the exchange
rates (Eijffinger and De haan 2000).
There are several ideas about the effects of the openness of
a country on the costs of the monetary union. The economic
literature of monetary union introduces two views about the
relation between the degree of openness and the occurrence of
asymmetric shocks: The European Commission view and the
Krugman view (1991), According to the EC view, There is a
negative relationship and we can conclude that the cost of a
monetary union (as a percentage of GDP) reduces in the
relatively open than in the relatively closed economy. Because
the openness of a country reduces the probability that
asymmetric shocks occur. But on the second view, the costs of a
monetary union increase with the degree of openness of
countries (De Grauwe 2000).
The present paper analyses how openness affects the cost of
a monetary union by the effectiveness of the exchange rate in
dealing with asymmetric shocks.
خلاصه ماشینی:
The economic literature of monetary union introduces two views about the relation between the degree of openness and the occurrence of asymmetric shocks: The European Commission view and the Krugman view (1991).
But on the second view, the costs of a monetary union increase with the degree of openness of countries (De Grauwe 2000).
The present paper analyses how openness affects the cost of a monetary union by the effectiveness of the exchange rate in dealing with asymmetric shocks.
According to the EC view, there is a negative relationship and we can conclude that the cost of a monetary union (as a percentage of GDP) reduces in the relatively open than in the relatively closed economy.
According to the EC view, there is a negative relationship and we can conclude that the cost of a monetary union (as a percentage of GDP) reduces in the relatively open than in the relatively closed economy.
But according to the second view, the costs of a monetary union (The costs of relinquishing the exchange rate instrument) increase with the degree of openness of countries.
If we accept the EC view, the intersection point of the benefit and the cost lines determines the critical level of openness for a country to join a monetary union.
(De Grauwe 2000) This article analyses how openness affects the cost of a monetary union by the effectiveness of the exchange rate in dealing with asymmetric shocks.
We can therefore derive the conclusion that the cost of a monetary union most likely declines with the degree of openness of a country.