The following figure shows the hypothetical OCA criteria with the Eurozone for selected countries. Assume that these are based solely on economic criteria€”that is, without reference to other political considerations. Refer to the diagram in responding to the questions that follow.

a. Which of the countries satisfies the OCA criteria for joining a monetary union?
b. Compare Poland and the United Kingdom in terms of the OCA criteria regarding market integration with the Eurozone. Discuss one possible source of differences in integration with the EU in the two countries.
c. Compare Poland and the United Kingdom in terms of the OCA criteria regarding symmetric versus asymmetric shocks (relative to the Eurozone). Discuss one possible source of differences in symmetry with the EU in the two countries.
d. Suppose that policy makers in both Poland and the United Kingdom care only about being able to use policy in response to shocks. Which is more likely to seek membership in the EMU and why?
e. What did the ERM crises reveal about the preferences of the United Kingdom? Why has the United Kingdom sought membership only in the EU without seeking membership in the Eurozone? Consider other costs and benefits not in the diagram, both economic and political.
f. What did membership of the Eurozone reveal about the preferences of Greece? Consider other costs and benefits not in the diagram, both economic and political.

Transcribed Image Text:

Symmetry-Integration Diagram Symmetry of shocks Slovakia Switzerland Poland Denmark United Kingdom Greece OCA Turkey Market integration