Title: Single Currency: Pros a& Cons
Headings: Advantages and Disadvantages of a Single Currency.
Advantages and Disadvantages of a Single Currency.
Content: With a single currency like Euro, both our German and Italian firms can do away with exchange rate fluctuations and hedging costs. Thus, trade and investment are stimulated within this currency union. Reduced Transaction Costs. A single currency would encourage tourisms in the single currency area. A tourist to the European countries in the Euro currency area (12 of them in 2002) would not have to worry about exchanging different currencies and loss in transaction costs (commission and time) as she travel. A survey in the past found that a unit of currency say 1 French Franc would lose 40% of its value after if it is exchanged into each of the 12 national currencies then used in the European Community (before the formation of EU). This also encourage trade across borders in this single currency area. A Euro for example eliminate the extra accounting costs needed to keep tract of different and fluctuating exchange rates among trading partners within the single currency area. This reduced cost of trading within the single currency area and thus stimulate more trade. Price Transparency.