Convergence and Optimum Currency Area, as Advanced Economic Integration

Abstract

In 1961, in the earlier stage of the European integration, professor Bela Balassa proposed a five successive phase model. Today, the half century experience on integration and corresponding literature issued lets us see rather two big phases (instead of five). The one would be the incipient integration, that came to enlarge the economic openess and internationalization and shaped: (i) free trade area (FTA) and (ii) customs union; the other would be the advanced integration, in which internationalization would be replaced by the unique-common market and other two commandments would replace or just reshape the older FTA and customs union into: (iii) economic convergence and (iv) optimal currency area. The last two will be emphasized by our paper, as for their current description-analysis in the literature.
Classification-JEL: F02, F15, F36
Keywords: European type integration; incipient & advanced integration phases; customs union; economic convergence; monetary union; fiscal union; optimum currency area