Open currency areas

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Open currency areas by Mind Map: Open currency areas

1. Criterias

1.1. Labour mobility (Mundell)

1.1.1. optimal currencies arears are those within which people move easily

1.2. Product diversification (Kenen)

1.2.1. counrties whose production and exports are widely diversified and of similar structure form an optimum currency area

1.3. Fiscal transfers

1.4. Solidarity

1.4.1. When the common monetery policy gives rise to conflicts of national interests, the countries that form a currency area need to accept the costs in the name of a common desire

1.5. Homogeneous preferences

1.6. Openness(McKinnon)

1.6.1. Countries which are very open to trade and trade heavily with each other form an optimum currency area

1.7. Political criteria

1.7.1. homogeneous preferences

1.7.1.1. Currency union member country must share a wide consensus on the way to deal with shocks

1.7.2. Fiscal transfers

1.7.2.1. Countries that agree to compensate each other for adverse shocks form an optimum currency area

1.7.3. Solidarity

1.7.3.1. When the common monetary policy gives rise to conflicts of national interests, the countries that form a currency area need to accept the costs in the name of a common destiny