Question

Some countries share a common currency (e.g., those that participate in the euro), while some other countries peg their currencies to others (e.g., Chile’s currency is pegged to the U.S. dollar). Many nations, however, maintain their own independent currencies. Discuss the potential for additional regional currencies such as the euro. If you support the concept, should those currencies be tied to regional economic blocs?

Answer 1

Answer:

The potential of additional regional currencies such as the euro is very important, and for this reason, many economists support the idea. In fact, John Maynard Keynes, one of the most influential economists in history, once proposed not a regional common currency, but a common global currency.

The potential lies in the fact that regional currencies allow to coordinate a common monetary policy in several countries. This common policy means that several countries now have the same interest rates, the same rate of inflation, and the same currency itself, and all these commonalities facilitate the exchange of goods and services.

While the Euro has had drawbacks since its inception, the Euro has survived, and is now one of the strongest curriencies in the world.

If you support the concept, should those currencies be tied to regional economic blocs?

I support the concept, and I agree that they should be tied to regional economic bloc. It would not be very effective to adopt a common currency for countries that are not economically integrated in other areas.