Explain costs and benefits of establishing a common currency, Microeconomics

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Discuss the costs and benefits of establishing a common currency.

So, there is a convergence issue in setting up the common currency - and there will also be a convergence problem in maintaining it - commonly known as the asymmetry problem. There are also the economic and political costs of giving up domestic policy freedoms. In spite of this, there are numerous advantages in having a single currency for an area which is economically integrated.

 


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