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Asses the claim that the countries using thr Euro constitute an optimal currency area

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These two models are based upon the concepts of stationary expectations as well as the International Risk Sharing. (Kenen, 1969)One of the key attribute of an optimal currency region therefore is based on the fact that it is often larger than a single country. Te creation of Euro has been considered as an engineered attempt to provide a case study to test the theory of how to create an optimal currency region as individual countries in the region may not have been sufficient enough to form an optimal Ero is the single currency in Eurozone comprising of the 17 of the 27 countries in the European Union area.

Oficially launched in late 1990s, oer the period of time, Ero has become one of the most dominating currencies in the world. A the start of Euro as a currency, i was widely expected that the Euro will replace US Dollar as the most traded currency in the world. Bcked up by the economic powers of the European economic powers in order to ensure that region is served by currency.

(Richard; &Wyplosz, 2004. Ero is officially administrated by the European Central Bank and the Eurosystem whereas the ECB has the sole responsibility to set the setting up the monetary policy for the region whereas the Eurosystem has the mandate of printing and minting currency notes as well as coins. A discussed above, Ero was considered as a stable currency before the late 2000s when economic crisis started to happen. Te current sovereign crisis wherein many European countries are finding it relatively difficult to pay off their obligations time has created strong doubts over the sovereign debt crisis.

Geece specially faced critical challenges in terms of paying off its debts and resultantly this has created strong pressure on Euro to decline against US Dollar in international market. Tis has also suggested that the Euro may not be an optimal currency region if it continues to perform in its current form. Tis suggests the absence of physical restrictions to travel and facilitate the free movement of the labor across the borders. I also requires the low cultural as well the institutional arrangements make it relatively easier for the labor to move freely.

Lbor mobility therefore is considered as a hedge against the adverse shocks when exchange rates are fixed or cannot be adjusted easily. I has been observed that. ..

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