Introduction into the theory of optimum currency areas

Abstract

The study provides a comprehensive overview of the development of the Optimum Currency Area theory up to date. It first concentrates on examination of the broader discussion on different exchange rate regimes and their appropriateness for different economies. It then turns to the basic issue of the theory - to determine and study the preconditions which countries (or regions) aspiring to join a monetary union must fulfill in order to ensure that they will benefit from joining rather than be affected adversely. This study presents a critical evaluation of these preconditions by including the most recent developments in the study of the respective areas. It also extends the debate by discussing issues which have so far not been explicitly pursued by the theory as characteristics of an optimum currency area.optimum currency areas, monetary unions, European monetary union