Optimum currency area, a currency area in which the benefits of using a common currency outweigh the costs of individual economies’ giving up their own currencies. ... integration approach to optimal currency areas’, according to which, from a technical economic point of view, all regions or nations linked by unrestricted international mobility of financial capital form an optimal currency area. Prize-winning Canadian economist Robert Mundell, who first described in the 1960s what is today known as the theory of optimal currency areas (OCA). In his work, “A Theory of Optimum Currency Areas” (Mundell), Mundell asserted that there is a balance required in making the In addition, the OCA theory can be viewed as a tool for finding an answer to the question on how to choose the optimum exchange rate regime. How likely are asymmetric demand shocks when integration increases? optimum currency area (OCA) theory Optimum currency area (OCA) theory originates from two seminal articles in the early 1960s by the economistsMundell(1961)andMcKinnon(1963). The article deal with optimum currency area (OCA) theory and examines which of the new EU member states are suitable candidates for the euro extended by EU-10 countries membership. These articles drew on contemporary debates about fixed versus flexible exchange rates, treating a com-moncurrencyastheextremecaseofafixedexchange The theory of Optimum Currency Areas (OCA) is a macroeconomic instrument which defines criterions under which it would create the greatest economic benefit for a … Reconsideration of the Theory of Optimal Currency Area." According to the theory of optimal currency areas, which Columbia’s Robert Mundell helped to pioneer, for a common currency to succeed its … According to this theory, the gains t view the full answer. In this paper we use both traditional "hierarchical" clustering as well as the more recently developed "model-based" clustering techniques and compare the outcome in each case. In some of the surveys, it is noted that the theory of optimum currency areas has come under criticism. 1. Mundell concluded in that lecture that "the international monetary system depends only on the power configuration of the countries that make it up". The Theory of Optimum Currency Areas is based on the contribution of Robert Mundell, the pioneer of specific field researches (1961) – the issue being subsequently resumed by other economists, such as R. Mc Kinnon (1963), Kenen (1969) etc. An optimum currency area (OCA) is a theoretical notion. In this thesis aspects of the European Economic and Monetary Union are presented, especially from the perspective of the theory of optimum currency areas. According to the Theory of Optimum Currency Areas as developed by the Canadian Nobel laureate, Robert Mundell, countries must fulfil several convergence criteria … 8783 February 2002 JEL No. Economies form a currency area if they use the same legal tender or have their exchange rates irrevocably fixed. For all those interested in "Optimum Currency Areas" - my new infoposter "ECONOMICS" is now available: - the poster gives an overview of the development of economic theory from its beginnings. But a nation with numerous economically nonhomogeneous subregions can be viewed as a homogeneous entity Third, according to the theory of optimum currency area, if there exists an adjustment mechanism such as flexible prices and wages or other measures … On one hand, it is asserted that the traditional theory of optimum currency area tends to be too pessimistic about the possibility for countries to join a monetary union. E5, F4 ABSTRACT In this paper we show that a currency area can be a self-validating optimal policy regime, even when monetary unification does not foster real economic integration and intra-industry trade. According to the theory of optimum currency areas,a currency area has the least chance for success when: A) Countries of the currency area have differing business cycles B) Workers have a high degree of mobility across borders of the currency area C) Prices and wages can be adjusted in response to economic disturbances D) A single monetary policy affects all member countries in the same manner

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