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Why European Union is not an Optimal Currency Area: The Limits of Integration

Author

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  • Huseyin Mualla Yuceol

    (Mersin Universitesi Iktisadi ve Idari Bilimler Fakultesi, Maliye Bolumu)

Abstract

Currency regimes and their effects have been studied widely in both developed and developing countries. This study discusses what European monetary unification is telling about the interpretation of the optimum currency area (OCA) in the framework of classical contributions to the literature. The study concludes that although several weaknesses of the analytical framework of the early OCA theory have been modified and some of the OCA properties have technically sophisticated, there is no unified theory in this area. The experiment of Europe with economic and monetary union intensify this conviction. Moreover, it concludes that a single currency advances members’ living standarts when they have similar economic structures and international trading patterns, but proves detrimental when these diverge. Therefore, it can be said that the enlargement process with the new candidate countries including Turkey puts forward both opportunities and threats for the future of European Union in terms of achieving a currency union.

Suggested Citation

  • Huseyin Mualla Yuceol, 2006. "Why European Union is not an Optimal Currency Area: The Limits of Integration," Ege Academic Review, Ege University Faculty of Economics and Administrative Sciences, vol. 6(2), pages 59-72.
    • Handle: RePEc:ege:journl:v:6:y:2006:i:2:p:59-72
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    Cited by:

    1. Labrinidis, George, 2018. "The roots of the Euro," MPRA Paper 86560, University Library of Munich, Germany.

    More about this item

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions

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