The formation of an optimum currency area is more likely to be beneficial:
A) the smaller is the mobility of resource among the various nations of the optimum currency area
B) the smaller the structural similarities of member nations are
C) the more willing member nations to closely coordinate their fiscal, monetary, and other policies are
D) all of the above

Question

Quizplus · Accepted Answer

The more willing member nations are to closely coordinate their fiscal, monetary, and other policies, the more likely the formation of an optimum currency area will be beneficial. This is because coordination of policies can help address the issue of asymmetric shocks, where one member of the currency area is experiencing economic downturn while others are not. The smaller the mobility of resources or the smaller the structural similarities of member nations may actually make it more difficult to coordinate policies effectively.

The Formation of an Optimum Currency Area Is More Likely