Saarc single currency
The most obvious costs arise from the loss of sovereign control over monetary and exchange rate policies. It simply states that regional economic integration is a good thing and therefore we should pursue it by all available means, including a common currency.
In the long sweep of history, common currencies have usually followed political unification often attained through imperial conquest. Second, they point out that currency unification will eliminate exchange risk and uncertainty and thereby promote inter-country trade and investment.
Fourth, advocates back a currency union in the belief that it will promote political unity amongst the constituent nations. One possible notable exception is the year-old enterprise of European unification, spawned by the trauma of two world wars.
Political unity has not been catalysed through currency unification. The first argument is really not an argument at all. Let's consider these arguments in turn. Although regional integration enthusiasts tend to gloss over these, the costs can be quite substantial for member countries.
First, they argue that a common currency is a characteristic of strong regional economic integration and therefore a worthy goal. In this case, clearly the advent of the euro has preceded full political unity. Third, these objectives will also be advanced by the reduction of transaction costs arising from currency conversions.
The second and third arguments of eliminated exchange risk and reduced transaction costs are genuine economic benefits of a common currency. Incidentally, there isn't much impetus for a common currency in even these more successful regional trading arrangements. Nor is the situation likely to change dramatically in the foreseeable future. It's an idea whose time has not yet come and, quite possibly, never will. Similarly, the fourth argument is only a statement of faith, not supported by experience.
It begs the obvious question of whether such integration is in the national economic interests of the cooperating nations. Recent econometric studies by Maskay e. That question can only be answered by exploring the costs and benefits of economic cooperation through various means.
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