Chapter 4 Essay questions

  1. What is the Keynesian view of the costs and benefits of a monetary union? What is the monetarist view?
  2. Explain why the Keynesian view is pessimistic about the prospects of a monetary union and why the monetarist view is optimistic. What is your view on this issue?
  3. Why did monetary union become popular in Europe during the 1980s and 1990s?
  4. Explain why an increase in the asymmetry of shocks must lead to more labour market flexibility to make a monetary union attractive to its members.
  5. Explain what the implications are of the trade-off between insurance (budgetary union) and flexibility.
  6. Why is it unlikely that the EU-28 is an optimal currency area?
  7. Could your conclusion that the EU-28 is not an optimal currency area change in the future? What does it depend on?
  8. Is there much evidence in favour of the endogeneity hypothesis of a monetary union?
  9. An increase in economic integration can also lead to an increase in the asymmetric shocks. This could make a monetary union less attractive. Do you think this is a serious obstacle to a monetary union?
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