Costs of Adopting a Common European Currency. Analysis in Terms of the Optimum Currency Areas Theory.docVIP

Theoretical and Applied Economics Volume XVIII (2011), No. 2(555), pp. 89-100 Costs of Adopting a Common European Currency. Analysis in Terms of the Optimum Currency Areas Theory Aura Gabriela SOCOL Bucharest Academy of Economic Studies aura.socol@economie.ase.ro Abstract. This analysis presents a theoretical approach of the possible costs related to a national economy which desires to be part of a monetary union. The analysis is made in terms of the classical optimum currency areas theory, which represents the basis of the monetary union process. The objective of this theory was to make a monetary union possible. This theory shows that the countries can obtain net benefits as a result of having a common currency, thus being able to avoid the possible adjustment problems. As a matter of fact, its great merit is that it identified certain properties of the countries being part of a monetary union, these properties representing real alternative tools for losing the independence of the monetary policy. Keywords: the classical optimum currency areas theory; monetary union; asymmetric shocks. JEL Codes: F15, F36. REL Codes: 8M, 20H.  90 Aura Gabriela Socol Introduction Although the problem of the monetary unions is more present than ever, both for the developed countries which have already joined the Euro Zone, and also for the less developed states which are preparing to meet the criteria for being accepted, this topic has been put forward for a long time in the economic literature. Thus, the classical optimum currency areas theory – a theory which represents the basis of the monetary union term, has come out in 1961 in an article presented by Robert Mundell (who is considered to be ?the father” of the theory referring to the optimum currency areas). The objective of this theory was to make a monetary union possible. The optimum currency areas (OCA) theory is ba