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Optimum currency area: an epistemological view

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  • Puiu, Cristina

Abstract

This paper aims to provide a critical analysis of the evolution of the optimum currency area theory. The motivation for this paper arises from the fact that there are many studies that make references to the OCA theory, providing various insights for it. In the first part of the paper I will address the foundation of this theory through the contributions of Mundell (1961), McKinnon (1963), Kenen (1969) and the subsequent development, which has not been a smooth one. The contributions brought to the OCA theory have been market by some paradoxes, but there has been a reconciliation among those which led to a renewed interest into the subject. The second part refers to the empirical phase in which we focus mostly on the European integration experience due to the various data and research that it provides. Thus, there is a need to distinguish between the OCA theory and the EMU, the latter referring to a question regarding timing and modalities of creating a currency union. The merit of the OCA theory is that has brought together a large amount of research on monetary integration.

Suggested Citation

  • Puiu, Cristina, 2011. "Optimum currency area: an epistemological view," MPRA Paper 35055, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:35055
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    References listed on IDEAS

    as
    1. Dellas, Harris & Tavlas, George S., 2009. "An optimum-currency-area odyssey," Journal of International Money and Finance, Elsevier, vol. 28(7), pages 1117-1137, November.
    2. Mongelli, Francesco Paolo, 2002. "ìNew" Views on the Optimum Currency Area Theory: What is EMU Telling US?," Royal Economic Society Annual Conference 2002 140, Royal Economic Society.
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    6. Michael B. Connolly, 2001. "Robert A. Mundell: A Profile," Review of International Economics, Wiley Blackwell, vol. 9(4), pages 585-594, November.
    7. Herbert Giersch, 1973. "On the desirable degree of flexibility of exchange rates," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 109(2), pages 191-213, June.
    8. Horvath, Julius, 2003. "Optimum currency area theory: A selective review," BOFIT Discussion Papers 15/2003, Bank of Finland Institute for Emerging Economies (BOFIT).
    9. Andrew K. Rose, 2000. "A Review of Some of the Economic Contributions of Robert A. Mundell, Winner of the 1999 Nobel Memorial Prize in Economics," Scandinavian Journal of Economics, Wiley Blackwell, vol. 102(2), pages 211-222, June.
    10. Francesco Paolo Mongelli, 2008. "European Economic and Monetary Integration, and the Optimum Currency Area Theory," European Economy - Economic Papers 2008 - 2015 302, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
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    More about this item

    Keywords

    currency area; optimality; endogenous criteria;
    All these keywords.

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions

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