The existence of an optimum currency area is not a given even if all parties are...

The existence of an optimum currency area is not a given even if all parties are well-intentioned. What are the other necessary aspects of coordination that raise the chances for success?

Expert Solution

Optimal currency area means using one currency in a particular geographical region. There are different aspects of coordination that can make it successful. The first aspect is to strong willingness to increase the efficiency of trade. With this aspect, nations will compliment each other and one currency can be used. The second aspect is the ability among the nations to absorb the economic fluctuations in one country, by another country. It will maintain the value of currency used and longevity to the optimum currency area is created. The third aspect is the formation of proactive committee or group having members of the nations that will apply suitable monetary policy. It will help stabilize the inflation, regulate the money supply and other macroeconomic challenges. The next aspect is the trade preference given to each other by the nations who participate in the optimal currency area.

Above aspects can bring success to the optimal currency area.

Rahul Sunny answered 1 year ago

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