Q. Is Europe an optimum currency area?

Answer: Yes the area's economy is strongly integrated with its own: most EU members export as of 10 to 20 percent of their output to other EU members. However still, the law of one price doesn't apply to many products such as the auto market. In 1998 prices for the BMW 520i diverse by as much as 29.5 percent among the United Kingdom and the Netherlands. Prices for the Ford Fiesta diverse as much as 43.5 percent among the United Kingdom and Portugal!

The text is more crucial, "The extent of intra-European trade isn't large enough however to give us an overwhelming reason for believing the European Union itself is an optimum currency area." As well the text cites the reality that may be price convergence has more to do with Internet marketing than optimum currency area. The book bring to a close that on balance it seems doubtful that the 1992 measures have yet pushed Europe dramatically closer to being an optimum currency area.