Part VI Monetary Unions and other Forms of Monetary Organization, 24 The Nature and History of Monetary Unions

Subject(s):

Monetary obligations — Institutional framework of monetary union

This chapter illustrates the nature and history of monetary unions. A monetary union involves a transfer (or ‘pooling’) of monetary sovereignty by the participating countries. The question that each government must therefore consider is: do the benefits of participating in the union justify the concomitant loss or dilution of monetary sovereignty? Considerations of this nature have in turn led to the theory of the ‘optimum currency area’. This refers to an area within which it would be feasible to share a common currency. The chapter then looks at some now defunct monetary unions and two such other unions which continue to operate—namely, the monetary unions established in Africa and in the Eastern Caribbean. It also considers future monetary unions.