In my booklet Mundell (1965), I analyzed a model of three currency areas--the dollar area, the sterling area, and a third bloc based on a European currency, what I called the Athaler@ area. The offers that appear in this table are from partnerships from which Investopedia receives compensation. A Theory of Optimum Currency Areas (1961), by Robert Mundell, was selected for the Top 20. The theory of optimum currency areas (OCA) explores the criteria as well as first time that someone used the phrase optimum currency area was Mundell. The Optimum Currency Area Theory and the Euro Robert A. Mundell Global Risk Annual Lecture as part of the Global Risk Series With his careful analysis of Optimum Currency Area (OCA) theory and its application in the Eurozone, Professor Vitor Constancio, former Vice President of the European Central Bank (2010-2018), pays He received the Nobel Memorial Prize in Economic Sciences in 1999 for his pioneering work in monetary dynamics and optimum currency areas. Indeed, recent interest in optimum currency areas has been revived by the proposal for a common Euro- Mundell, Robert (1961) A theory of optimum currency areas. The question is innovative, for Mundell envisaged a new global monetary map from the regional rather than the national viewpoint. A Conference on Optimum Currency Areas at Tel-Aviv University, 5th December 1997. Fiscal imbalance is a situation in which the future incomes streams for unit of government do not balance the future debt and spending obligations. While traditionally each country has maintained its own separate, national currency, work by Robert Mundell in the 1960s theorized that this might not be the most efficient economic arrangement. Three of Mundell’s achievements are particularly worthy of note. This spreads the shocks in the area because all regions share claims on each other z the same currency and can use them for dampening the shock, while in a flexible exchange rate regime, the cost will be concentrated on the individual regions, since the devaluation will reduce its buying power. On the one hand, optimum currency areas would, in any case, almost never fit into the confines of a state or a collection of existing states. The theory of optimum currency areas, initiated by Robert Mundell (1961), is the organizing framework for the analysis. The euro raises issues addressed by a theory known as the optimum currency area (OCA) theory. ... did not constitute an optimum currency area, as it met the above-mentioned criteria only partially. Get smart with the Thesis WordPress Theme from DIYthemes. In 1961 Robert Mundell published his famous article A Theory of Optimum Currency Are-as1 presenting his idea of an optimal mone-tary area in which there should be perfect in- ... optimal currency area (OCA) criteria in the light of EMU, Working Paper 69, Wien: Österreichische However, a common currency results in a loss of each country's ability to direct fiscal and monetary policy interventions to stabilize their individual economies. stable url Note that this criteria can come into conflict with some of the above criteria, because the greater the degree of integration among countries' economies (mobility of goods, labor, and capital) the more they will tend to specialize in different industries. The theory of the optimal currency area was pioneered by economist Robert Mundell. ‘‘Theory of Optimum Currency Areas.’’ American Economic Review 51: 657–65. A national currency however, was considered an axiom. 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