Currency union

A currency union (also known as monetary union) involves two or more states sharing the same currency without their necessarily having any further integration (such as an economic and monetary union, which would have, in addition, a customs union and a single market).

Three types of currency unions exist:

1. Informal – unilateral adoption of foreign currency
2. 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
3. Formal with common policy – establishment by multiple countries of a 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.

List of currency unions

Existing

Currency	Union	Users	Est.	Status	Population	GDP (nominal $)
CFA franc	Issued by the (French) Overseas Issuing Institute between 1945−1962 then by the Central Bank of West African States and the Bank of Central African States	Benin  Burkina Faso  Côte d'Ivoire  Guinea-Bissau  Mali  Niger  Senegal  Togo  Cameroon  Central African Republic  Chad  Republic of the Congo  Equatorial Guinea  Gabon	1945	Formal, common policy	151,978,440
CFP franc	Issued by the (French) Overseas Issuing Institute	French Polynesia  New Caledonia  Wallis and Futuna	1945	Formal, common policy	552,537
East Caribbean dollar	Eastern Caribbean Currency Union of the OECS	Anguilla  Antigua and Barbuda  Dominica  Grenada  Montserrat  Saint Kitts and Nevis  Saint Lucia  Saint Vincent and the Grenadines	1965	Formal, common policy de facto EMU for CSME members[1]	625,000
Euro	International status and usage of the euro	Eurozone:  Austria  Belgium  Cyprus  Estonia  Finland  France  Germany  Greece  Ireland  Italy  Latvia  Lithuania  Luxembourg  Malta  Netherlands  Portugal  Slovakia  Slovenia  Spain and EU special territories: Akrotiri and Dhekelia (SBAs)  French Southern and Antarctic Lands  Saint Barthélemy  Saint Pierre and Miquelon  Andorra  Kosovo  Monaco  Montenegro  San Marino   Vatican City	1999/2002	Formal, common policy and EMU for EU members Formal for Monaco and SBAs (those form a de facto EMU with the Eurozone) Formal for Andorra since 2011 Informal for Kosovo, Montenegro Formal for the rest	328,655,062
Hong Kong dollar		Hong Kong  Macau	1977	Informal; Decreto-Lei n.º 16/95/M prohibiting the refusal of the pataca by merchants and businesses.[2]	7,775,200
Singapore dollar Brunei dollar	Managed together by the Monetary Authority of Singapore	Brunei  Singapore	1967	Formal; currencies mutually exchangeable[3]	5,137,000	36,438,000,000
Armenian dram		Armenia  Nagorno-Karabakh Republic	1994	Informal	3,368,900	18,715,000,000
Australian dollar		Australia and external territories: Ashmore and Cartier Islands Australian Antarctic Territory  Christmas Island  Cocos (Keeling) Islands Coral Sea Islands Heard Island and McDonald Islands  Norfolk Island  Kiribati  Nauru  Tuvalu	1966	Informal	22,557,000
Pound sterling	Sterling area (former)	United Kingdom and overseas territories:  British Antarctic Territory  British Indian Ocean Territory  Falkland Islands  Gibraltar  Saint Helena, Ascension and Tristan da Cunha  South Georgia and the South Sandwich Islands and crown dependencies:  Guernsey  Isle of Man  Jersey	1939	Semi-formal. UK banknotes are legal tender in locations outside the UK. Local currencies are pegged to the GBP but not necessarily accepted in the UK: Guernsey pound, Manx pound, Jersey pound and Alderney pound, Falkland Islands pound, Gibraltar pound, Saint Helena pound	62,321,000
Indian rupee		India  Bhutan[4]    Nepal[5]	1974	Informal Nepal minor usage	1,215,083,000
New Zealand dollar		New Zealand and dependencies:  Tokelau Ross Dependency  Cook Islands  Nauru  Niue  Pitcairn Islands	1967	Informal	4,411,000
Israeli new sheqel		Israel  Palestine	1927/1986	Informal	11,738,000
Jordanian dinar		Jordan  Palestine (West Bank only)		Informal	8,922,000
Russian ruble		Russia  Abkhazia  South Ossetia	2008	Informal	142,177,000
South African rand	Multilateral Monetary Area	Lesotho  Namibia  South Africa  Swaziland	1974	Formal de facto customs and monetary union for SACU members	52,924,669	316,936,000,000
Swiss franc		Liechtenstein   Switzerland	1920	Informal since 1924 creation of a customs union and common market in EFTA in a de facto EMU	7,774,546	497,171,000,000
Turkish lira		Turkey  Turkish Republic of Northern Cyprus	1983	Informal	75,081,100	734,043
United States dollar		United States and insular areas:  American Samoa  Guam  United States Minor Outlying Islands  Northern Mariana Islands  Puerto Rico  United States Virgin Islands  Ecuador  El Salvador  Panama  Marshall Islands  Federated States of Micronesia  Palau  Timor-Leste  Turks and Caicos Islands  British Virgin Islands BES islands	1904 (Panama only)	Formal for insular areas and sovereign status with Compact of Free Association,[6] informal for other areas	339,300,000

Note: Every customs and monetary union and economic and monetary union also has a currency union.

 Zimbabwe is theoretically in a currency union with four blocs as the South African rand, Botswana pula, British pound and US dollar freely circulate, the US Dollar being official tender. .

Currency unions

Additionally the autonomous and dependent territories, such as some of the EU member state special territories, are sometimes treated as separate customs territory from their mainland state or have varying arrangements of formal or de facto customs union, common market and currency union (or combinations thereof) with the mainland and in regards to third countries through the trade pacts signed by the mainland state.^[7]

Planned

Community	Currency	Region	Target date	Notes
Bolivarian Alternative for the Americas	SUCRE	Latin America /Caribbean	?	It is planned to begin as an electronic currency involving all countries of the Bolivarian Alliance for the Americas.
East African Community	East African shilling	Africa	2015
West African Monetary Zone	Eco	Africa	2020	Inside Economic Community of West African States, planned to eventually merge with West African franc
ASEAN+3	Asian Monetary Unit	Asia	?	a free trade agreements matrix partially established
Cooperation Council for the Arab States of the Gulf	Khaleeji	Arabian Peninsula	c. 2013-2020[8][9]	Oman and the United Arab Emirates do not intend to adopt the currency at first but will do at a later date.

Disbanded

• between Bahrain and Abu Dhabi using the Bahraini dinar
• between Bahrain, Kuwait, Oman, Qatar and the Trucial States, using the Gulf rupee from 1959 until 1966
• between Aden and South Arabia, Bahrain, Kenya, Kuwait, Oman, Qatar, British Somaliland, the Trucial States, Uganda, Zanzibar and British India (later independent India) using the Indian rupee
• between British India and the Straits Settlements (1837–1867) using the Indian rupee
• between Czech Republic and Slovakia (briefly from January 1, 1993 to February 8, 1993) using the Czechoslovak koruna
• between Ethiopia and Eritrea using the Ethiopian birr
• between France, Monaco, and Andorra using the French franc
• between the Eastern Caribbean, Jamaica, Barbados, Trinidad and Tobago and British Guiana using the British West Indies dollar
• between the Eastern Caribbean, Barbados, Trinidad and Tobago and British Guiana using the Eastern Caribbean dollar
• between Italy, Vatican City, and San Marino using the Italian lira
• between Jamaica and the Cayman Islands using the Jamaican pound and later Jamaican dollar
• between Kenya, Uganda and Zanzibar using the East African rupee
• between Kenya, Uganda and Zanzibar (and later Tanganyika) using the East African florin
• between Kenya, Tanganyika and Zanzibar (later merged as Tanzania), Uganda, South Arabia, British Somaliland and Italian Somaliland using the East African shilling
• Latin Monetary Union (1865–1927), initially between France, Belgium, Italy and Switzerland, and later involving Greece,^[10] Romania, Spain and other countries.
• between Liberia and the United States using the United States dollar
• between Mauritius and Seychelles using the Mauritian rupee
• between Nigeria, the Gambia, Sierra Leone, the Gold Coast and Liberia using the British West African pound
• between Prussia and the North German states (1838–1857) using the North German thaler
• between Russia and the former Soviet republics (1991–1993) using the Soviet ruble
• between Qatar and all the emirates of the UAE, except Abu Dhabi using the Qatari and Dubai riyal
• between Saudi Arabia and Qatar using the Saudi riyal
• between Samoa and New Zealand using the New Zealand pound
• Scandinavian Monetary Union (1870s until 1924), between Denmark, Norway and Sweden^[10]
• between the Solomon Islands, Papua New Guinea and Australia using the Australian dollar
• South German guilder
• between Spain and Andorra using the Spanish peseta
• between Trinidad and Tobago and Grenada using the Trinidad and Tobago dollar
• between Brunei, Malaysia, and Singapore (1953–1967) using the Malaya and British Borneo dollar
• between Cambodia, Laos, and Vietnam (1885–1952) using the French Indochinese piastre
• between South Africa and Botswana (1966–1976) using the South African rand
• between Egypt and Sudan using the Egyptian pound – until 1956
• between West Germany and East Germany between 1 July 1990 and 3 October 1990, as part of a temporary, so-called "Monetary, Economic and Social Union" prior to German reunification.
• between Republic of Ireland and United Kingdom between 1928 and 1979 using the Irish Pound.

Never materialized

• proposed Pan-American monetary union – abandoned in the form proposed by Argentina
• proposed monetary union between the United Kingdom and Norway using the pound sterling during the late 1940s and early 1950s

See also

• List of pegged currencies
• North American Currency Union (Amero)^[11]

References

1. Anguilla and Montserrat are members of OECS currency union, but not of the CSME.
2. http://www.marcasepatentes.pt/files/collections/pt_PT/1/2/14/CPI%201995.pdf Decreto-Lei n. 16/95/M
3. To all intents and purposes a monetary union. They are the last two nations whose dollars have remained at par and mutually interchangeable since the days when the Spanish Dollar was the united currency of large areas of the New World and South East Asia.
4. alongside the ngultrum
5. Not official, but freely used as a tender in Nepal, due to primarily the economic flux with India and also the instability caused by that country's civil war.
6. Compact of Free Association, Article V, Section 251
7. EU Overseas countries and some other territories participate partially in the EU single market per part four of the Treaty Establishing the European Community; Some EU Outermost regions and other territories use the Euro of the currency union, others are part of the customs union; some participate in both unions and some in neither.
   Territories of the United States, Australian External Territories and Realm of New Zealand territories share the currency and mostly also the market of their respective mainland state, but are generally not part of its customs territory.
8. http://www.arabianbusiness.com/575538-kuwait-sees-gcc-currency-union-taking-up-to-10-years
9. www.dunatv.hu (Hungarian)
10. Bolton, Sally (10 December 2001). "A history of currency unions". guardian.co.uk. Retrieved 26 February 2012. France persuaded Belgium, Italy, Switzerland and Greece
11. Not currently on any political agenda, based mostly off conspiracy theories.

Further reading

• Acocella, N. and Di Bartolomeo, G. and Tirelli, P. [2007], ‘Monetary conservatism and fiscal coordination in a monetary union’, in: ‘Economics Letters’, 94(1): 56-63.
• Bergin, Paul (2008). "Monetary Union". In David R. Henderson (ed.). Concise Encyclopedia of Economics (2nd ed.). Indianapolis: Library of Economics and Liberty. ISBN 978-0865976658. OCLC 237794267.

External links

African monetary union inches closer	United States of Southern Africa?
East Africa's first steps towards union	West Africa opts for currency union
Gulf States push for single currency	'Limited gains' from Gulf single currency
Do the Mercosur Countries Form an Optimum Currency Area?	Argentina plans monetary union
Quadrant Magazine article on the Pacific	Economist- Antipodean currencies (Australia and New Zealand)
Three Perspectives on an Australasian Monetary Union	Reasons for the collapse of the Rouble Zone
In Search of the "Ruble Zone"	OECD Development Centre – the Rand Zone
A single African currency in our time?	South Africa proposes adoption of the rand as provisional SADC common currency