Theory of Optimal Currency Area: A Framework for Discussions of Monetary Integration

The authors contend that the theory of optimum currency areas (OCA) provides a useful framework for discussions of monetary integration. The authors summarize the historical development of monetary integration and discuss possible future development. Theoretical issues, such as those raised in literature on OCA in the 1960s and by the modern ?endogenous view? are considered alongside empirical studies regarding OCA theory applied to the EMU and the Czech Republic, and a so-called OCA-index is calculated. The authors conclude that OCA theory is a long-term theory and that it does not possess sufficient operational precision.