I Get By With Alittle Help From My Friends....
I Get By With Alittle Help From My Friends....
Dinar Outcast
European monetary union
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2 Re: European monetary union Sun Jan 10, 2010 2:02 pm
Guest
Guest
Loss due to a monetary union
■ Fleming-Corden analysis
• Assume there are 3 countries involved: H
(host country), P (potential partner country),
W (rest of the world)
• In order to maintain internal and external
equilibrium, H needs to devalue its currency
relative to W, P needs to revalue its currency
relative to W
• However, if they are in an exchange-rate
union, H and P must devalue or revalue their
currency together
• If countries deprive themselves of rates of
exchange as policy instruments, they impose
on themselves losses that are essentially
losses emanating from enforced departure
from internal balance
Easy laymans terms on who should do what in the world.
■ Fleming-Corden analysis
• Assume there are 3 countries involved: H
(host country), P (potential partner country),
W (rest of the world)
• In order to maintain internal and external
equilibrium, H needs to devalue its currency
relative to W, P needs to revalue its currency
relative to W
• However, if they are in an exchange-rate
union, H and P must devalue or revalue their
currency together
• If countries deprive themselves of rates of
exchange as policy instruments, they impose
on themselves losses that are essentially
losses emanating from enforced departure
from internal balance
Easy laymans terms on who should do what in the world.
Message [Page 1 of 1]
I Get By With Alittle Help From My Friends.... » Iraqi Dinar » Iraqi News » World Economy » World Economy » European monetary union
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