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Assessing the Feasibility of Optimum Currency Area in the OIC Countries: Using Fuzzy and Hard Clustering Algorithms

Author

Listed:
  • Razzaghi, Somayeh

    (PhD Candidate of International Economics, University of Tabriz)

  • Salmani, Behzad

    (Professor of Economics, University of Tabriz)

Abstract

The Organization of Islamic Cooperation (OIC) was established in 1971 and includes 57 Islamic countries. The most important goal of this organization is strengthening and expanding political, economic, and commercial ties and creating a common market among its member countries. Considering the successful experience of Euro area, it might be possible that a common currency area could help the OIC countries to achieve the integration. Therefore, the purpose of this study is to investigate the possibility of forming a common currency area among the OIC countries. Based on the convergence criteria presented in the optimum currency area literature, the study uses two different clustering algorithms, i.e. fuzzy and hard clustering methods to cluster the OIC countries. The results show that there are adequate similarities in the economic structures of the Arab Economic Union (AEU) countries. Therefore it seems plausible to create a common currency area among the AEU countries. In addition, a subgroup of the Economic Cooperation Organization (ECO) countries also can join this common monetary union

Suggested Citation

  • Razzaghi, Somayeh & Salmani, Behzad, 2019. "Assessing the Feasibility of Optimum Currency Area in the OIC Countries: Using Fuzzy and Hard Clustering Algorithms," Quarterly Journal of Applied Theories of Economics, Faculty of Economics, Management and Business, University of Tabriz, vol. 6(1), pages 1-20, May.
    • Handle: RePEc:ris:qjatoe:0136
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    More about this item

    Keywords

    Optimum currency area; Clustering algorithm; OIC countries;
    All these keywords.

    JEL classification:

    • C38 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Classification Methdos; Cluster Analysis; Principal Components; Factor Analysis
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • F15 - International Economics - - Trade - - - Economic Integration
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries

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