Optimum Currency Area

The economic theory that currencies should operate in an area that is sufficiently similar throughout (homogeneous) to provide a stable basis for that currency. Otherwise, there will be pressures for sub-areas to break away or requirements for major transfers of money from a central authority to sub-areas in order to iron out regional differences.

Long-established stable states are generally regarded as ideal currency areas because they tend to be roughly similar throughout (homogenous) and possess all the tools for economic policy-making.


The Euroland is not yet an optimum currency area, and the EU has only the power (competence) to organise monetary policy – i.e. not all the tools.


See Economic and Monetary UnionSingle currency and Euroland.