Author Question: How much trade do currency unions create? What will be an ideal ... (Read 32 times)

kellyjaisingh · **on:** Jun 30, 2018

How much trade do currency unions create?

What will be an ideal response?

Question 2

How mobile is Europe's labor force?

What will be an ideal response?

ryhom · **Reply #1 on:** Jun 30, 2018

Answer to Question 1

The main result is that currency unions promote trade. One study found that on average, two countries that are members of the same currency union trade three times as much with each other as countries that do not share a currency. Even if the euro were to raise trade within the euro zone by 50 percent, the positive effect on people's welfare could be immense, as another study has shown. However, some challenge the conclusion. Some claim the results would not be duplicated when applied to large countries such as the members of the EU; another study found out that leaving a common currency area as Ireland did has not caused reduction in UK-Ireland trade.

Answer to Question 2

Differences in language and cultural discourage labor movements between European countries. Differences in regional unemployment rates are smaller and less persistent in the United States than are differences between national unemployment rates in the European Union. Even, within European countries, labor mobility appears limited, partly because of government regulations. For example, the requirement in some countries that worker establish residence before receiving unemployment benefits makes it harder for unemployed workers to seek jobs in regions that are far from their current homes.