CUSTOMS UNION (MONETARY UNION) ADVANTAGES AND DISADVANTAGES: (EURO ZONE) : EURO

ADVANTAGES:

1) Increased trade flows boosts foreign direct investment

2) Currency: no exchange rate fluctuations so it will eliminate the uncertainty
3) Business confidence: will improve causing more economic growth as well as trade growth within
the countries in the same customs union
4) More choice
5) Transactions cost: when we have the same currency, exchange rates are stable.
6) When countries do not have the same currency, and they want to trade or invest in other
countries there is a CHARGE when you want to buy other currencies, but in this type of
economic integration

DISADVANTAGES:

1) When countries are in the same customs union (monetary union) interest rates are decided
by the central bank. This means that individual countries are no longer free to decided and
manipulate their own interest rates according to their economic conditions. And they will no
be able to affect the rate of their inflation through using those tools (IR - MONEY SUPPLY)
2) Economically stronger states (members) have to support the economically weaker member
states, with high net gov debt.
3) The individual countries within the monetary union are not able to alter or change their own
exchange rates in order to affect the international competitiveness of their exports or the
costs of their imports.
4) There has to be A HARMONIZED FISCAL POLICY within the countries.
5) Same distribution of taxes on all member countries
6) Transparency between member countries is a must, if corruption occurs within one country,
it will affect other member countries reptation.
7)