North American Monetary Union from the point of view of the Optimum Currency Areas theory

The goal of this thesis is to evaluate the readiness of the member states of NAFTA to adopt a common currency or some other narrower monetary arrangement. This readiness is evaluated by the lens of Optimum currency areas theory (OCA). This thesis provides an overview of the basic OCA criteria, estimates the Optimum Currency Areas Index as a tool to assessing the fulfillment of OCA criteria and readiness of the countries of NAFTA to adopt a common currency or some other narrower monetary arrangement along the lines of the European monetary union. The results of this research indicates that Canada vis a vis USA is in state of advanced convergence and Mexico converges towards the USA economy. We can say that on the basis of OCA criteria the common currency arrangement is likely to be possible in the near future