The Euro

On January 1, 1999, eleven European countries replaced their national currencies and introduced a single European currency, the Euro. As of then, the Euro is considered to be the official currency in the eleven participating countries. Bills and coins of the national currencies will remain in circulation as sub-denominations of the Euro until January 1, 2002, when they will be exchanged against new Euro coins and bills. However, all inter-bank commerce and stock exchange trade is now denominated in …

…which labor and other factors of production flow freely. In an OCA, policymakers balance the savings in transaction costs from the creation of a single money against the consequences of diminished policy autonomy from the loss of the exchange rate and monetary policy as instruments of responding to economic shocks. That loss will be more costly when economic shocks are more region-specific. Countries qualify for membership in an OCA if its benefits outweigh its costs.