Monetary Union

Monetary union - advantages and disadvantages

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  • Created by: connie34
  • Created on: 17-05-13 15:00

Monetary Union

Advantages

  • Elimination of transaction costs
  • Price transparency
  • Easier trading conditions
  • Encouragement of investment
  • Travelling costs reduced
  • Reduction in uncertainty
  • Gains in efficiency

Disadvantages

  • Changeover costs
  • Higher prices for consumers
  • Consumer confusion
  • Loss of policy adjustment
  • Unstable currency
  • Higher unemployment
  • Less economic growth
  • Loss of exchange rate flexibility

Evaluation

Overall, I believe the UK should not join the Euro - there are barriers to our mobility of labour (such as language), and the countries within the Euro are too broadly different to consider joining. Consider Ireland compared to Germany - their reactions to external shocks differ vastly. We cannot afford to be pulled down.

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