Optimum currency area: an epistemological view
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.
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Working Paper Series
0138, European Central Bank.
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