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

Somayeh Razzaghi () and Behzad Salmani ()
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Somayeh Razzaghi: PhD Candidate of International Economics, University of Tabriz
Behzad Salmani: Professor of Economics, University of Tabriz

Quarterly Journal of Applied Theories of Economics, 2019, vol. 6, issue 1, 1-20

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

Keywords: Optimum currency area; Clustering algorithm; OIC countries (search for similar items in EconPapers)
JEL-codes: C38 E52 F15 O57 (search for similar items in EconPapers)
Date: 2019
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