Monetary Union

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Monetary Union

A group of independent countries that share a single currency. That is, these countries, while maintaining sovereignty on economic policy, taxes, and similar issues, have transferred responsibility for a monetary policy to a central bank shared by participating members. The most famous monetary union is the eurozone, though another example is the West African Monetary Union. A monetary union is also called a currency union.
References in periodicals archive ?
Fourth, cross–border formal currency unions without political union are almost always temporary.
He said: "I am pleased that the governor took this opportunity to confirm the Bank of England's neutrality on the issue of Scottish independence and that his Edinburgh speech was a technical assessment of currency unions not a judgment on independence.
There are enough examples of indebted countries in currency unions that endured destructive feedback loops and eventual severe recession to warrant full and thorough consideration.
If such deliberations ever were to happen, they would need to consider carefully what the economics of currency unions suggest are the necessary foundations for a durable union, particularly given the clear risks if these foundations are not in place," Mr Carney said at a business lunch in Edinburgh.
Yesterday, setting out the threats that can endanger currency unions, Mr Carney said: "Those risks have been demonstrated clearly in the euro area over recent years, with sovereign debt crises, financial fragmentation and large divergences in economic performance.
Currency unions require a mechanism for permanent transfers to poorer regions.
Just as it is the responsibility of creditor regions in the world's other currency unions to support the debtor regions (which they do through a variety of means), it is up to the eurozone's creditor regions to underpin its debtor regions' solvency.
Retrospectively, they seemed to have overestimating the coordination of business cycles within the eurozone because they looked at historical data for several mainly small currency unions composed of countries unlike those of the eurozone in terms of scale or characteristics.
Most economic studies indicate that currency unions tend to encourage and facilitate trade between member states, chiefly through the removal of exchange rate volatility and transaction costs within the currency area.
Erwin Nierop, Senior Official from the European Central Bank, focused on the efforts in many regions to create currency unions.
While the methodology developed in this paper can be applied to the analysis of different exchange rate arrangements, we illustrate it here with one specific application: the effect of currency unions on bilateral trade and on the extent of comovement of output shocks and price shocks.