Monetary unions are becoming more common in the world today. They are being used to create open markets and strong economy blocks. A monetary union is a group of countries sharing a common currency. More often than not, the countries share geographical boundaries and also have tight trade and financial relationships. The countries stop using their individual currencies and adopt a common currency for use. The most recent monetary union is the European Monetary Union (EMU). The following paper will give an overhaul on monetary unions and will centralize more on the EMU.
There are numerous advantages and disadvantages associated with a country maintaining its currency. The advantages are that a country is more able to maintain stability in the exchange rate as an individual as opposed to a union, a union has more rigid policies than an individual country which is unsought for, by countries, there is also loss of sovereignty of a country once it joins a monetary union, a country is also more likely to suffer economic problems in instances when a member country of a union is suffering from inflation, hence a country’s economic and currency stability is affected by the stability of the economies of member countries.