Theory of Optimum Currency Areas as Conceptual Background for Regional Monetary Unions

Abstract

The evolution of the theory of optimum currency areas is researched and the positive and negative effects of monetary integration are examined. The main criteria of the theory of optimum currency areas are summarized and their value is shown. The reasons for losing the independence of monetary policy in the process of monetary integration through the prism of a so-called «incompatible triangle» or «impossible trinity» are highlighted. European way to overcome the «impossible trinity» is demonstrated and the role of the theory of optimum currency areas for the European Economic and Monetary Union is considered. It was argued that there are no prerequisites in the nearest future in Ukraine to pass all stages of integration needed to join the monetary union. Theory of OCA could be helpful for estimation the overall appropriateness of monetary integration, analysis of its potential benefits or disadvantages and selection of instruments for exchange rate policy.