The theory of optimum currency area revisited: Lessons from the euro/dollar competitive currency regimes

We begin our study with the EU-12 who have adopted euro as their common currency under one common central bank, The European Central Bank (ECB), and extend our analysis to the EU-15 and the EU-25. The euro has progressively become a global currency as its shares of world output and trade have become competitively large. Thus, the euro/dollar competitive currency regimes present a choice of optimum currency areas for the global economy. The concept of geo-economics has replaced the Cold War concept of geo-politics. The European Union is based on the principle of competition and the euro/dollar competitive currency regimes will contribute to the optimization of economic gains for all micro units - households as well as business units - in the two currency regimes and also in the rest of the world.