The Theory of Optimum Currency Areas and European Monetary Unification

  • Giovanni Magnifico


In a pioneering article published in 1961, Professor Mundell endeavoured to lay the foundations of a theory of optimum currency areas; a few important contributions have been made subsequently, notably by Professors McKinnon and Kenen. Mundell warned the reader not to regard the exercise as purely academic: ‘Certain parts of the world are undergoing processes of economic integration and disintegration, new experiments are being made, and a conception of what constitutes an optimum currency area can clarify the meaning of these experiments’ ([33] pp. 65–7). Now, about a decade later, it so happens that monetary unification has been pushed in the forefront of the process of economic (and political) reorganisation of Europe. And yet the promising start of the optimum currency area theory does not seem to be living up to expectations — so much so that already in 1968 Professor Ingram could comment:


Exchange Rate Monetary Policy Trade Balance Monetary Union Currency Area 
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© Giovanni Magnifico 1973

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  • Giovanni Magnifico

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