Essay on Costs and Benefits of Poland Joining the European Monetary Union.

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European monetary union is based on the assumptions of presence of fixed exchange rate, free movement of capital and coordinate monetary policy. Fixed exchange rates are preferred by producers and consumers of the European economy, since the economy becomes more predictable. In such market conditions, it is easier to foresee the future and plan the actions that are to be taken up in the future. The second assumption - free movement of capital - is crucial for optimizing the use of capital and for enlarging the benefits that come from it. The third assumption is coordinate monetary policy; its role is vital in creating monetary union, since it ensures that the countries participating in the union have the same aims and together strive to …show more content…
The machines used in banks and shops have to be adjusted for the new currency. It is a huge cost but once it is paid there is no need to worry about it any longer.
Another disadvantage of introducing Euro is that the countries lose their independence when it comes to fiscal policy. No country in the Euro zone is allowed to have higher debt than 3% of its GDP, this might cause the slow downs of the countries experiencing rapid growths. What is more the tool of exchange rate is no longer usable; the countries governments may not help their trade by lowering or increasing exchange rates. This method is disputable since the effects are temporary and it also takes some time for the mechanisms to work. The inflation rate is no longer dependant on the country and the adjustment mechanisms for asymmetric real shocks is not available. When it comes to the asymmetric shocks they might be avoided by movement of the labor, but it is not easy within the European community that speaks many languages and has no common language. By common language I understand a language which every single member of EU speaks fluently.
Another reason against introducing common currency is that it enables the transfers of monetary shocks across countries. If there is only one currency in the country it can protect itself against the negative effects of the crisis that is present in another country, a great example of this I Poland which did not feel the crisis of 2007 as fast and
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