Mundell analyzed the criteria underlying an appropriate functioning of the Monetary Union ever since the European Monetary Union was still at the draft stage. 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. East Asian countries, including China and India, according to the optimum currency area theory criteria, which is operationalized through the use of cluster analysis. How likely are asymmetric demand shocks when integration increases? There are two other factors that would inhibit the … 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. 1 R. Mundell (1961): A Theory of Optimum Currency Areas, in: The American Economic Review 51(4), pp. An optimum currency area (OCA) is a theoretical notion. ... 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. I also thank the participants in the conferences "Monetary policy implications of Heterogeneity in a Currency Area", organized by the European Central Bank in 2004, “40 anni di attività dell'Ente Einaudi (1965-2005)” organized by Ente According to this theory, the gains t view the full answer. In the formal theory of optimum currency areas, Norway’s GGcurve shows how its efficiency gainsfrom joining the euro zone increases with the level of Norway’s economic integration with the countries of the euro zone, and Norway’s LL curve shows how its stability lossesfrom joining the euro zone decreases with the level of Norway’s economic integration with the countries of the euro zone. This is a deviation from the early discussion on optimum currency areas. Third, according to the theory of optimum currency area, if there exists an adjustment mechanism such as flexible prices and wages or other measures … According to the theory of optimal currency areas, which Columbia’s Robert Mundell helped to pioneer, for a common currency to succeed its … It should be 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. Answer) Much of the analysis of the benefits and costs of Europe's common currency is based on the theory of an optimum currency area. 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. Emin Ertürk, Derya Yılmaz, Işın Çetin, Optimum Currency Area Theory and Business Cycle Convergence in EMU, Handbook of Research on Global Indicators of Economic and Political Convergence, 10.4018/978-1-5225-0215-9.ch004, (67-91), (2016). Countries of the currency area have differing business cycles b. But a nation with numerous economically nonhomogeneous subregions can be viewed as a homogeneous entity An optimum currency area (OCA) is defined here as the optimal geographic domain of a single currency, or of several currencies, whose exchange rates are irrevocably pegged and might be unified. 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