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:
“Common experience is the gold reserve which confers an exchange value on the currency which words are; without this reserve of shared experiences, all our pronouncements are cheques drawn on insufficient funds.”
—René Daumal (1908–1944)
“We must choose. Be a child of the past with all its crudities and imperfections, its failures and defeats, or a child of the future, the future of symmetry and ultimate success.”
—Frances E. Willard 1839–1898, U.S. president of the Women’s Christian Temperance Union 1879-1891, author, activist. The Woman’s Magazine, pp. 137-40 (January 1887)