In the past two centuries, only a handful of monetary unions have been created successfully. Now, Europe has embarked on the creation of one of the most ambitious to date: the European Monetary Union, which will encompass nearly 400 million people and have the highest gross domestic product in the world.
A nation’s exchange rate regime affects the link between its monetary aggregates and its general level of prices, according to Clemens J.M. Kool and John A. Tatom. They explain an empirical specification of a quantity theory of money called the P-star model, which indicates that a country's price level depends principally on its own money stock.
Policymakers generally regard the discount window as an essential tool for preventing the spread of financial crises, but some critics have argued that it is an unnecessary—and costly—policy instrument. The arguments against the discount window emphasize that it may unwisely postpone bank failures or undermine the Fed’s control over the supply of reserves.
Many economists have argued that unless premiums are risk-based, deposit insurance will encourage banks to take greater risks than they otherwise would, thereby increasing the likelihood of failure. Because virtually all banks today are insured, isolating the effects of deposit insurance from other regulatory and economic conditions that affect bank performance is problematic.
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