Валютные союзы: принципы, преимущества и недостатки.

Agreement involving states sharing a single currency

A currency union (also known as monetary union) is an intergovernmental agreement that involves two or more states sharing the same currency. These states may not necessarily have any further integration (such as an economic and monetary union, which would have, in addition, a customs union and a single market). There are three types of currency unions:
Informal – unilateral adoption of a foreign currency. Formal – adoption of foreign currency by virtue of bilateral or multilateral agreement with the monetary authority, sometimes supplemented by issue of local currency in currency peg regime. Formal with common policy – establishment by multiple countries of a common monetary policy and monetary 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.

Implementing a new currency in a country is always a controversial topic because it has both many advantages and disadvantages. New currency has different impacts on businesses and individuals, which creates more points of view on the usefulness of currency unions. As a consequence, governmental institutions often struggle when they try to implement a new currency, for example by entering a currency union.

A currency union helps its members strengthen their competitiveness on a global scale and eliminate the exchange rate risk. Transactions among member states can be processed faster and their costs decrease since fees to banks are lower. Prices are more transparent and so are easier to compare, which enables fair competition. The probability of a monetary crisis is lower. The more countries there are in the currency union, the more they are resistant to crisis.

The member states lose their sovereignty in monetary policy decisions. There is usually an institution (such as a central bank) that takes care of the monetary policymaking in the whole currency union. The risk of asymmetric "shocks" may occur. The criteria set by the currency union are never perfect, so a group of countries might be substantially worse off while the others are booming. Implementing a new currency causes high financial costs. Businesses and also single persons have to adapt to the new currency in their country, which includes costs for the businesses to prepare their management, employees, and they also need to inform their clients and process plenty of new data. Unlimited capital movement may cause moving most resources to the more productive regions at the expense of the less productive regions. The more productive regions tend to attract more capital in goods and services, which might avoid the less productive regions.

Convergence in terms of macroeconomics means that countries have a similar economic behaviour (similar inflation rates and economic growth). It is easier to form a currency union for countries with more convergence as these countries have the same or at least very similar goals. The European Monetary Union (EMU) is a contemporary model for forming currency unions. Membership in the EMU requires that countries follow a strictly defined set of criteria (the member states are required to have a specific rate of inflation, government deficit, government debt, long term interest rates and exchange rate). Many other unions have adopted the view that convergence is necessary, so they now follow similar rules to aim the same direction. Divergence is the exact opposite of convergence. Countries with different goals are very difficult to integrate in a single currency union. Their economic behaviour is completely different, which may lead to disagreements. Divergence is therefore not optimal for forming a currency union.

The first currency unions were established in the 19th century. The German Zollverein came into existence in 1834, and by 1866, it included most of the German states. The fragmented states of the German Confederation agreed on common policies to increase trade and political unity. The Latin Monetary Union, comprising France, Belgium, Italy, Switzerland, and Greece, existed between 1865 and 1927, with coinage made of gold and silver. Coins of each country were legal tender and freely interchangeable across the area. The union's success made other states join informally. The Scandinavian Monetary Union, comprising Sweden, Denmark, and Norway, existed between 1873 and 1905 and used a currency based on gold. The system was dissolved by Sweden in 1924. A currency union among the British colonies and protectorates in Southeast Asia, namely the Federation of Malaya, North Borneo, Sarawak, Singapore and Brunei was established in 1952. The Malaya and British Borneo dollar, the common currency for circulation was issued by the Board of Commissioners of Currency, Malaya and British Borneo from 1953 until 1967. Following the cessation of the common currency arrangement, Malaysia (the combination of Federation of Malaya, North Borneo, Sarawak), Singapore and Brunei began issuing their own currencies. Contemporarily, a currency reunion of these countries might still be feasible based on the findings of economic convergence.

The European currency union is a part of the Economic and Monetary Union of the European Union (EMU). EMU was formed during the second half of the 20th century after historic agreements, such as Treaty of Paris (1951), Maastricht Treaty (1992). In 2002, the euro, a single European currency, was adopted by 12 member states. Currently, the Eurozone has 20 member states. The other members of the European Union are required to adopt the euro as their currency (except for Denmark, which has been given the right to opt out), but there has not been a specific date set. The main independent institution responsible for stability of the euro is the European Central Bank (ECB). Together with 15 national banks it forms the European System of Central Banks. The Governing Board consists of the Executive Committee of the ECB and the governors of individual national banks, and determines the monetary policy, as well as short term monetary objectives, key interest rates and the extent of monetary reserves.

Community Currency Region Target date Notes East African Community East African shilling Africa 2012 (not met), 2015 (not met), 2024 West African Monetary Zone Eco Africa 2027 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 ? Oman and the United Arab Emirates do not intend to adopt the currency at first but will do at a later date. African Economic Community Afro or Afriq Africa 2028 Planned for 2028 or laterBrazil, Argentina and possibly other countriesSurLatin America ?As Financial Times reports, Brazil and Argentina will announce in January 2023 that they are starting preparatory work on a common currency "Sur" (South). The initiative would later be extended to invite other Latin American nations.