Adopting the Euro: Costs or Benefits?

Abstract

This paper evaluates the present estate of euro implementation in Monetary and Economic Union (EMU). The Romanian admittance in EU at January 2007 increases interest to study the transmission and coordination mechanisms, related to mix common monetary policy - different fiscal policy across the countries in the euro area. Our study focuses on Euro Zone using the Optimum Currency Area Theory and empirical evidences. The controversies beetwen economists regarding the construction process of EMU remain large. The paper evaluates the costs and benefits of adopting the euro and the main effects of Romanian integration in European Monetary Union. What are the consequences of implementing the "tye hands" strategy for Romanian financial authorities? Can Romania solve the potential conflict between real and nominal convergence relating the European integration? What is the best strategy for Romania with the aim to obtain a faster real convergence with the European Union countries? Can Romania maximize the benefits to adopting euro in 2014? Is the European Union a Optimum Currency Area?

Keywords

• optimum currency area
• cost
• benefits
• European Monetary Union
• euro
• convergence