Bank of Israel paper says Europe is sub-optimal currency area

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A paper published on August 15 in the Bank of Israel's economic review argues that, in contrast to the US, Europe does not meet the criteria for an optimal currency area. The paper suggests greater political union is needed to preserve the euro.

The authors, Assaf Razin and Steven Rosefielde, identify a trade-off in the decision to join a currency union – a country sacrifices control of monetary policy in exchange for greater intra-regional trade and labour mobility. "The US provides a good

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