Also economic agents can invest more easily in any part of the euro area and thereby spread the risk of potential local shocks having an impact on income and consumption. 7 In 1973 Robert Mundell made a second seminal contribution to the debate on currency areas.
The Bank’s policy is to intervene only when the exchange rate is at exceptional levels; when it is unjustified by medium term economic fundamentals; when intervention is seen as consistent with the Policy Targets Agreement; and when market conditions make intervention opportune.