Advantages of the Single Currency:
- Elimination of exchange rate risks- firms buy and sell for future delivery. Having one currency removes the danger of the value changing before payment is made. This increases trade.
- Price transparency
- Transaction costs- no need to change currencies between member countires, thus saving money. This increases trade.
- Employment- easier for people to cross into the next country to work.
Disadvantages of the Single Currency:
- Sensitivity to interest rates- Unlike most European countires, most UK householders own their own house and their mortgages are a high percentage of their income. UK monetarpolicy needs to take this into account when changing interest rates.
- Recession
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