Is the Eurozone an Optimal Currency Area (OCA)是欧元区的一个最优货币区（OCA）.pptVIP

SIU, HING LAM BRANAVAN SIVAKUMAR OLALLA FIDALGO LORENZO MARTYNAS SKORUPSKAS AARON LEUNG Is the Eurozone an Optimal Currency Area (OCA)? Optimal Currency Area An Optimal Currency Area?is a geographical region in which sharing a single currency would maximize economic efficiency. According to Mundell (1961) areas that suffer large asymmetrical shocks are not likely to be successful currency areas. Why? Mundell argues that: Big asymmetric shocks need great monetary policy efforts to be controlled + fixed exchange rates (give up monetary policy) = global monetary policy will not be suitable for the particular situation of each member state. Optimal Currency Area Criteria In order to avoid the aforementioned asymmetrical shocks as far as possible, Mundell stated the following criteria: Wage flexibility Labour mobility Openness Fiscal transfers Similar business cycle Additional criteria Additional criteria were suggested by some authors: Production diversification (Kennen) Homogeneous preferences Solidarity criterion Mundell’s Criteria Labour mobility The idea includes physical ability to travel, lack of cultural barriers to free movement and institutional arrangements. Openness If you have an open area, different countries producing the same good will turn out to have the same real exchange rate. Therefore giving up the exchange rate (by adopting single currency) entails no loss of policy independence. Open areas + capital mobility + price and wages flexibility = markets forces automatically distributes money and goods to where they are needed. Mundell’s Criteria Fiscal transfers Asymmetric shocks in a country within a currency area will affect the whole area. Therefore it is important to have a fiscal transfers system to prevent these shocks from spreading. A system to redistribute money to countries/regions which are less developed. Similar business cycle When a member state experiences a boom or recession the rest of the countries follow. There