ECONOMICS TEACHERS’ GUIDE
1LawzCA
1LawzCA
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KEY TERMS AND THEIR DEFINITIONS<br />
DEFINITIONS OF USEFUL TERMS (5 OF 5)<br />
TERM<br />
Optimum<br />
currency areas<br />
DESCRIPTION<br />
This is an economic theory credited to Robert Mundell, in which economic efficiency<br />
would be maximised in a geographical region if the countries all shared a single<br />
currency.<br />
For the group of countries to become an optimal currency area they need a high level of<br />
trade integration; high labour mobility and real wage flexibility; a high level of capital<br />
market integration; and not suffer asymmetric macroeconomic shocks across different<br />
members of the single currency area.
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