Currency union


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Note: A currency union (also known as monetary union) is an intergovernmental agreement that involves two or more states sharing the same currency. These states may not necessarily have any further integration (such as an economic and monetary union, which would have, in addition, a customs union and a single market).

There are three types of currency unions:

Informal – unilateral adoption of a foreign currency.Formal – adoption of foreign currency by virtue of bilateral or multilateral agreement with the monetary authority, sometimes supplemented by issue of local currency in currency peg regime.Formal with common policy – establishment by multiple countries of a common monetary policy and monetary 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.

[Last update: 2023/08/26]