Optimem currency area theory
1. Explain and discuss the nature of the microeconomic benefits from a fully fixed exchange rate/common currency and how these benefits depend on the degree of intemational economic integration. What difference does it make whether the exchange is fixed or whether national currencies are abandoned in favour of a common currency?
2. Explain and discuss the nature of the macroeconomic casts of a fully fixed exchange rate and how these costs depend on the degree of economic integration.
3. Many economists have argued that even though a fixed exchange rate/common currency among a group of countries may not seem optimal ex ante, it may nevertheless turn out to be optimal ex post. Explain and discuss this argument.
4. Discuss the relevance of optimum currency area theory for (the debate on) monetary integration in Europe.