Title: Monetary union | economics | Britannica
Headings: Monetary union
Monetary union
economics
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Monetary union

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The most prominent example of a monetary union at the turn of the 21st century was the creation of a single currency among most European Union (EU) countries—the euro. This example demonstrates the interplay of economic and political factors in the process of setting up a monetary union. From an economic point of view, a monetary union helps reduce transaction costs in an increasingly integrated regional market. It also helps increase price transparency, thus increasing inner-regional competition and market efficiency. In addition, a monetary union was seen to be an essential step toward the further political integration of the EU. A monetary union may have adverse effects on the participating economies. In the case of the euro, some economists raised doubts about whether the EU could be regarded as an “optimum currency area.” Economic diversity and the inflexibility of labour markets were seen as the major obstacles for EU member states to exploit to the full the benefits of monetary union. Monetary integration was seen to leave some economies particularly vulnerable to asymmetric (external) shocks, as national decision makers were rendered no longer in control of nominal interest rates. ( See also euro-zone debt crisis .)