Theoretical concepts of currency unions and the practice of their implementation in the Eurozone

Currency unions as a deeper form of integration are a long-term objective for many integration groups including the Eurasian Economic Union. The revealing of some discrepancies between an ideal theoretical model of a currency union and its practical implementation in the Eurozone was a catalyst for further academic and professional research into its problems with the aim of reducing failures of other integration unities to develop a well-functioning currency union. This article summarizes the main concepts of the optimum currency area theory (OCA), outlines the stages of its evolution and lays out the results of its analysis. The fundamental principles of this theory are tested based on time-series data analysis. Based on the statistical data released by the United Nations Conference on Trade and Development and by Eurostat, the Eurozone was tested on its optimality according to both the methodology of the optimum currency area theory and Maastricht Criteria. The criteria to prove the optimality of the region based on the methodology of OCA theory included: inflation convergence, wage and price flexibility across the region, mobility of factors of production, symmetry to external shocks, economic openness, diversification of export, willingness for further financial and economic integration. By applying some statistical methods of data analysis, the lack of correspondence with the optimum currency area and convergence criteria was proved. During the testing it was identified that throughout its functioning as an economic and currency union the Eurozone was able to demonstrate, in several subsequent years, its compliance with some optimality criteria by 2014, the phenomenon that reflects on the main concepts of the new optimum currency area theory. It presents good prospects for a possible gradual transformation of the Eurozone into an optimal area in the long run. Also, this paper emphasizes the main reasons for the lack of optimality within the Eurozone, which could be summarized as inconsistency in economic development of the member states, caused by the rapid expansion of the European Union through the accession of some Eastern European states, and an external shock in the form of the global financial crisis. The main problems included imperfection of the methodology to calculate the convergence criteria and justification of their benchmarks and economic heterogeneity of the member states.