A currency union (also known as monetary union) is where two or more states share the same currency, though without there necessarily having any further integration such as an Economic and Monetary Union, which has in addition a customs union and a single market.
There are three types of currency unions:
- Informal - unilateral adoption of foreign currency
- Formal - adoption of foreign currency by virtue of bilateral or multilateral agreement with the issuing authority, sometimes supplemented by issue of local currency in currency peg regime
- Formal with common policy - establishment by multiple countries of common monetary policy and issuing authority for their common currency
The theory of the optimal currency area addresses the question of how to determine what geographical regions should share a currency in order to maximize economic efficiency.
Famous quotes containing the words currency and/or union:
“It is the international system of currency which determines the totality of life on this planet. That is the natural order of things today. That is the atomic, and sub-atomic, and galactic
structure of things today. And you have meddled with the primal forces of nature! And you will atone! Am I getting through to you, Mr. Beale?”
—Paddy Chayefsky (1923–1981)
“She had brought love to the union and he had brought a longing after the flesh.”
—Zora Neale Hurston (1891–1960)