1. optimal currency area
   1. in economics, an optimum currency area or region is a geographical region in which it would maximize economic efficiency to have the entire region share a single currency.
2. transaction costs and risks
   1. the most obvious benefit of adopting a single currency is to remove the cost of exchanging currency.
   2. theoretically allowing businesses and individuals to consummate previously unprofitable trades
   3. exchange-rate risk
      1. the absent of distinct currencies also remove exchange-rate risks
      2. the risk of unanticipated exchange rate movement has always added an additional risk or uncertainty for companies or individuals that invest or trade outside their currency zone
      3. companies hedge against this risk will no longer need to shoulder this additional cost
   4. financial integration
      1. financial markets on the continent are expected to be far more liquid and flexible than they were in the past
      2. it will allow larger banking firms to provide a wider array of banking service that can compete across and beyond the eurozone
3. price parity
   1. another effect of common european currency is that differences in prices - in particular in price levels - should decrease because of the law of one price
   2. differences in prices can trigger arbitrage (i.e. speculative trade in a commodity across borders purely to exploit price differential)
4. macroeconomic stability
   1. low levels of inflation are the hallmark of stable and modern economies
   2. high levels of inflation acts as a tax and discourage investment, generally viewed as undesirable
   3. some countries establish largely independent central banks such as Bundesbank in Germany; as the ECB is modeled on the Bundesbank (Jakob, 2000)
   4. the ECB does not have a second objective to sustain growth and employment
   5. many national and corporate bonds denominated in euro are significantly more liquid and have lower interest rate than was historically the case when denominated in national currencies
5. trade
   1. the consensus from the studies of the effect of the introduction of the euro is that it has increased trade within the eurozone by 5% to 10% (Review of World Economics, 2010)
6. investment
   1. physical investment seems to have increased by 5% in the eurozone due to the introduction (Baldwin, 2010)
   2. regarding FDI, a study found that the intra-eurozone FDI stocks have increased by about 20% during the first 4 years of the EMU (Angelini & Lippi, 2010)
   3. a study found that the introduction of the euro accounts for 22% of the investment rate after 1998 in countries that previously had a weak currency
7. effects on interest-rate
   1. decreased the interest rate of most member countries.
   2. The effect of such low interest rates made it easier for banks within the countries in which interest rates fell and the countries themselves to borrow significant amounts (above the 3% of GDP budget deficit imposed on the eurozone initially) and increase their public deficit and levels of privately held consumer debt.
8. tourism
   1. A study suggests that the introduction of the euro has had a positive effect on the amount of tourist travel within the EMU, with an increase of 6.5%
9. european sovereign debt crisis