An Institutional Economic Analysis Of The Stability Of Monetary Union

With the continuous deepening of economic globalization,international cooperation in monetary cooperation has gradually become the core issue of regional integration.The theory of optimal currency area is the theoretical foundation of monetary cooperation.The European monetary union is the most successful practice of this theory.The main reason is that the operating costs incurred by the European Monetary Union system and treaty regulations have weakened the stability of the euro.The operating costs mainly include maintenance costs for the system and the supervision of the treaty,the opportunity costs brought about by the convergence of monetary policy,the extra operating costs incurred in the low-interest-rate environment in the euro area,and the operating costs caused by the defects in the mechanism design.However,on the other hand,the cost of institutional change has strengthened the stability of monetary union.To a certain extent,the euro did promote economic integration within the European Monetary Union.The cost of change mainly includes increasing the transaction costs of the member countries’ economic and trade,threatening the stability of the international financial system,unfavorable to enhancing price stability,unfavorable to eliminating exchange rate risks and currency risks.The transition costs together with the operating costs affect the stability of the currency union.Although the operating costs of the system of currency union have weakened the stability of the euro and caused many problems in the euro area,the currency union also has the cost of transition.This kind of transition cost to a certain degree maintains the stability of the euro.Moreover,the structure of the financial system in the euro zone is inextricably linked.If debts and debt are converted to the old currency system,it will inevitably cause turmoil in the financial markets and cause disruption of the international monetary system.Countries in the euro zone need to promote the solution of institutional flaws in the euro zone and implement corresponding reform measures to reduce the operating costs of the currency union and strengthen the stability of the monetary union.