Take note

02|2012

IFIER

paperwork

The Eurozone:

An Ideal Currency Place?

by Martina Fürrutter

March 2012

IFIERpapers combine theoretical reasoning and academic exploration of current exploration subjects inside the two sub-disciplines of Intercontinental and Western european Relations. IFIER publishes spectacular work by simply students as well as new conclusions of proven experts. IFIER will build a special concern periodically. Efforts from politics scientists and students beyond Innsbruck will be explicitly meet.

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Publisher: Doris Dialer; Anja Opitz

Content: Doris Dialer; Martina Fürrutter; Anja Opitz; Kerstin Röck Graphics & Layout: Katharina Pohler

© IFIER

ISSN 2226-0080

a couple of

The Eurozone: An Optimum Currency Location? | Martina Fürrutter

02|2012

sions in case the Eurozone may be classified as an optimum money area of course, if the decision of unifying several EU member

states below one common currency continues to be

right. Lately, facing the present monetary turmoil, this scepticism has actually intensified and

Martina Fürrutter

for this it appears to be the correct moment to

throw a light on the EU-OCA discussion when

studies Politics Science and International Financial and Business Studies in the University of Innsbruck. 2010-2011 she has been an ERASMUS

student at the University of Zaragoza (Spain).

During the summer season term 2011 she was obviously a student

helper at the Senior high for Civic Education

Tutzing. She is briefly writing her first

Bachelor theses in Political Scientific research on the

Changing role in the European Union in nuclear

non-proliferation policy.

more and to examine the factors for founding

the regular currency region.

At farrenheit irst this paper can introduce Robert Mundell's theory of an The best Currency Region (OCA) and briefly go over the more standard

points of look at of his theory. By Mundell's

OCA-theory we will certainly move on to a cost-benefit

In 1961 Robert Mundell published his famous

evaluation of economic integration. Afterwards

article " A Theory of Optimum Currency Are-

several impact factors about integration quali-

as”1 offering his notion of an ideal mone-

ty of financial areas will probably be explained and

tary location in which there should be perfect in-

examined that the face in the Eurozone. This kind of

ternal freedom of factors and external immo-

part of the newspaper will be based in Paul

bility of factors.

Krugman's and Maurice Obstfeld's example

Nearly 4 decades later, it happened in 1999 the Western european

" Is definitely Europe the best possible Currency Area? ”,

Union founded their monetary area with the

wherever they recruit four OCA-criteria which will

common currency the Euro. By f irst it was

be used in this daily news for the analysis of the

used while bank cash, but in 2002 the European was

Eurozone. F inally we will certainly raise the query if

f inally released as banknote and via then

the European Budgetary Union (EMU) really is

on it has been employed as the EU's method of

an GANSO and response this issue in the lumination

payment.

with the EMU-founding-fathers' decision basis.

Right from the start on there were discus-

1 . A theory of an the best currency location

1

Robert A. Mundell applied the regular def i-

R. Mundell (1961): " A Theory of Ideal

Currency Areas, ” in: The American Economic

Review 51(4), pp. 657-665.

nition of a money area being a " website within

several

The Eurozone: An Ideal Currency Area? | Martina Fürrutter

which exchange rates are n ixed”2, he was the

installment payments on your

f irst to problem the appropriate domain of a

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integration

Cost-benefit-analysis

of

budgetary

currency area, however. For him the best

currency location is the area and not area, and this individual strikes the vital significance of a high level of factor...