ASSIGNMENT INTERNATIONAL FINANCE

Is it good or bad by India to have a common currency ? A common currency's attraction is that it doesn't represent the currency of any single country. From an economist's point of view, it's advantageous to deal with a lesser number of currencies since each time one converts a currency there is a huge loss. From the perspective of comparative advantage enjoyed by some of the South Asian countries in export of certain items like tea in the case of India and Sri Lanka, jute in the ca e of Bangladesh and India, basmati rice and cotton in the case of India and Pakistan

It is good1) Transaction Cost will be eliminated. For example, you can travel around the India you need not to worry about exchange rate. 2) Single currency in single market make sense- Trade and everything else should operate more efficiently with the India. Single currency in the single market seems to be the way forward. 3) Prevent war- If currency differs in the Indian state then chances of war within the Indian will increase. 4) Increased trade and reduced cost to firms- As there is uniformity in currency of India, cost of firms reduced and trade will substantially increases. 5) The labor mobility had been emphasized in the optimum currency area literature as it helps the members of a monetary union to adjust to asymmetric shocks by allowing labor to move from high unemployment areas to low unemployment areas. Its Bad 1) Price Transparency- In India, firms and households often find it difficult to accurately compare the prices of goods, services and resources across India, this discourage, this discourage trade 2) Over estimation of Trade benefits. 3) costs arise from the loss of sovereign control over monetary and exchange rate policies