Conditions for an Optimality of an Optimum Currency Area

G.D. Demopoulos and N.A. Yannacopoulos

Athens University of Economics and Business from Athens University of Economics and Business, Department of International and European Economic Studies

Abstract: Two approaches to the theory of OCA are distinguished in this paper. The first attempts to define the OCA from the point of view of a single country, and the second examines the optimality of a currency area of a given size anf membership. The present paper after reviewing the drawbacks of the marginalistic approach which looks at the determination of a currency area from the point of view of a single country, deals with the second approach, and argues that a currency area is optimal when the welfare functions of its constituent members are in the core.

Keywords: GAME THEORY; MONETARY AREAS; CURRENCIES (search for similar items in EconPapers)
JEL-codes: F31 C61 C71 (search for similar items in EconPapers)
Date: 1998

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