There can be no such thing as a perfect OCA but the US probably comes closest to it. If the US carves out monetary unions there will be a price to pay (since each state now needs a central bank and so on) that could very well outweigh the flexibility of having different currencies. Africa is another interesting case: because it has multiple currencies, the flexibility has resulted in relatively prosperous countries like Botswana, Namibia and South Africa while at the same time a few countries are at the other end of the spectrum. If Africa adopted a common currency, the living standards in the prosperous countries would tend to go lower because there would always be a transfer of wealth from the richer countries to poorer countries to maintain the common currency (exactly what Germany is being forced to do for Greece).
India is probably the best example of a country that roughly has a US like system but is worse off with a single currency because underneath it is more Europe like heterogeneity rather than US like homogeneity. The more developed economies of Bangalore, Mumbai subsidize the poorer economies of much of the rest of the regions in the country.
Friday, May 7, 2010
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