Monetary Unions and Endogeneity of the OCA Criteria

This article examines an endogeneity issue within the Optimum Currency Area (OCA) theory. According to the cost-benefit analysis, we found that there are the upper and the lower bounds in the degree of monetary integration for a monetary union to be created. We also found that a country may secede from the monetary union, depending on its degree of integration. A country may also secede when production specialization is facilitated with monetary integration within a framework of the “OCA line”. We also consider the endogeneity of the “OCA Index”, and applied our analysis to the optimum number of world currencies.