The Benefits of a Currency Union

What does a country gain from joining a currency union? From an economic theory point of view, the traditional Optimum Currency Area (OCA) theory argues that only countries that form an economic region, i.e. have a high level of labor and capital mobility between them, would be better off by having a common currency. On the one hand, the cost of currency conversion would disappear and this would promote trade. On the other hand, such a region would not be subject to asymmetric shocks. That is economic shocks with different effects on each country, which would require a country’s central bank to use the exchange rate as a policy tool to stabilize the economy. Since in a currency union such a policy tool would not be available, the adjustment process from such shocks would have to be done through fiscal transfers between countries, the emission of public debt or through deflationary pressures on wages.

A Brief Insight on the British Industrial Revolution

         Technological transfer of advanced agricultural techniques used in the Netherlands in the 18th century, the most advanced country by then but at the same time a land scarce one, to England, a poor and land abundant country, helped the latter generate agricultural surpluses (of labor and output) that allowed for investment in the labor intensive industrial sector. 

       The magnitude of this surplus allowed England to invest enough to quickly displace the Netherlands as the world's industrial powerhouse.

        The fact that potential real appreciation, explained by the massive increase in agricultural exports, did not hurt the export performance of England, could be explained by high Dutch export prices. One could argue that such prices should have been high because the Dutch were collecting temporal rents caused by the fact that they didn't have international industrial competitors at the time.

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1. Un clásico de porqué el desmembramiento de la eurozona parece poco problable. En resumidas cuentas, un país que intente dejar el euro, además de tener que abandonar la UE, crearía expectativas de devaluación para su nueva moneda, lo que originaría una corrida en su sistema financiero. Si varios países deciden hacerlo simultaneamente, se generaría lo que Eichengreen llamó "la madre de todas las crisis".

2. Razones económicas detrás de las invasiones de tierra en Brasil. Usando un data panel de los municipios en Brasil, los autores de este artículo argumentan que los pobres en zonas rurales tienden a invadir tierras cuándo se les presenta algún problema que afecta sus ingresos, como por ejemplo cuando la época de lluvias genera problemas. También argumentan que hay más invasiones en municipios con mayor desigualdad en la repartición de tierras.

3. Para finalizar, a los que como yo están contando los días para que comience el mundial de fútbol, les recomiendo que vean la siguiente propaganda de Nike, llamada "Escribe el futuro".