Edited by Thomas Oatley and W. Kindred Winecoff
Chapter 12: Currency unions in the developing world
Since the 1991 signing of Europe's Treaty on Economic and Monetary Union (EMU), scholarly attention to the topic of currency unions has mushroomed. However, frequently overlooked in this monetary revival have been the many non-European regional currencies created or attempted in the post-World War II era. Regional central banks in Africa and the Caribbean have been quietly issuing unified currencies for decades with little scholarly attention. Many other regions have created, or attempted to create, unified currencies in that time period. This chapter surveys literatures on currency unions in the developing world with a particular emphasis on causes of institution-building rather than the particular features of each individual institution. 'Currency union' refers to either shared currencies, when two or more states agree to use a common currency; or currency substitution, better known as 'dollarization,' when a state unilaterally pegs its currency to a stronger international currency or completely replaces its own currency with foreign currency. The common currency is usually a single currency issue (for example, the euro, the dollar) overseen by a single monetary institution, either a supranational institution such as the European Central Bank or a national central bank to which authority to act for the union is delegated (for example, Russia's central bank in the post-Soviet ruble zone). But some currency unions involve separately issued national currencies that are completely interchangeable but managed by separate national central banks (for example, the East African shilling).
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