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The theory of optimum currency areas was applied to the euro in this video tutorial, highlighting that the common currency benefited smaller periphery economies like Portugal, Ireland, Greece, and Spain with lower inflation rate, interest rates, and increased trade, but did not benefit Germany as much due to already low inflation and interest rates, and being a large economy. Germany joined the Euro for political rather than economic reasons. The costs of a common currency include no independent monetary policy and limited ability to respond to shocks. It is important to consider these costs when assessing the impact of a common currency on different countries.
