Antónia Fed’áková is receiving a Bachelor of Business Administration in Finance with a minor in Mathematics. After graduation, Antónia would like to apply her theoretical knowledge of financial concepts as a financial analyst in the field of corporate finance. Pursuing a Citation in Honors presented a challenging opportunity for Antónia to research various subjects in greater depth while allowing her to enhance her critical an analytical thinking. She enjoyed lectures and honors classroom discussions with professors and students, both of which provided a great opportunity to exchange ideas and learn from one another. Antónia’s deepest gratitude is extended to her research advisor, Dr. Art Comstock, for his expertise, time, and guidance through the process. Dr. Comstock’s continuous encouragement and devotion to his work have been a great inspiration to Antónia in her own academic development. She would also like to thank the reader of her thesis, Dr. Craig Johnson, whose passion for mathematics has been a motivation for her to challenge her own quantitative skills.
Director: Dr. Art Comstock
Reader: Dr. Craig Johnson
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The concept of creating a Common Monetary Union (CMU), favored by many politicians worldwide, has been studied and evaluated by economists for more than 40 years, and yet, it still remains a controversial issue. The most famous hypothesis behind the idea of creating a CMU was Mundell’s theory of Optimal Currency Areas (OCA), which served as a model for the adoption of the euro by European Union (EU) countries.
Mundell’s work, entitled Theory of Optimum Currency Areas, is understood to provide certain guidelines for evaluating the pros and cons of entering a CMU. In addition, by applying the Fleming-Mundell Modeli, it is possible to predict under what arrangements a region will benefit more from fixed as compared to flexible exchange rates. Mundell posed the question of whether all existing currencies should work in a floating exchange rate regime or if they would profit more by adopting a common currency and thus adhering to a fixed exchange rate. According to Mundell, a currency area is defined as a territory, in boundaries of which a fixed exchange rate applies. What makes such a currency area optimal is measured in terms of a currency area’s price level as well as its stability of employment. In other words, if a region is able to keep its economy in an external balance of payments position without disturbing the internal balance by raising unemployment or increasing price levels, such a region is considered to be an optimum currency area.
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