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:
“Money is the worst currency that ever grew among mankind. This sacks cities, this drives men from their homes, this teaches and corrupts the worthiest minds to turn base deeds.”
—Sophocles (497–406/5 B.C.)
“If the Union is now dissolved it does not prove that the experiment of popular government is a failure.... But the experiment of uniting free states and slaveholding states in one nation is, perhaps, a failure.... There probably is an “irrepressible conflict” between freedom and slavery. It may as well be admitted, and our new relations may as be formed with that as an admitted fact.”
—Rutherford Birchard Hayes (1822–1893)