The Issue of Regional Currency Unification - Essay Example

However, the important and fundamental differences between the European Union and the other regions need to be viewed critically, because the circumstances obtained in the case of the EU with regard to the regional currency unification are significantly different compared to the other regions mainly in terms of political background, level of interactions among the member states, diplomatic relationships, cultural differences, historical political relationships among these countries, the level of maturity and understanding on the part of the various stakeholders with regard to the benefits that might arise out of currency unification.

Apart from the economic considerations, which are not insurmountable in any case, the political situations in the different countries in the region both domestically and in relation to the neighboring countries, and the leadership issues in these countries could act as a stumbling block in the progress towards regional currency unification. Economic integration in the developing world Currency substitution in the backdrop of globalization is a common phenomenon in many countries. US Dollar has been used in several countries outside the US, and Euro outside EU countries simultaneously alongside the local currencies.

This practice is prevalent in most the countries in travel, tourism, and hotel industries, where the US Dollar and Euro are accepted freely. There are many full-fledged money changers registered with the central banks of various countries doing business around the world, who exchange currencies of a country for currencies of other countries. Currency movements across the borders have substantially increased over a period of time on account of remittances by the nationals residing in foreign countries consequent upon liberalization and globalization of economies.

In the integration process of the global economy, absolute control over the supply and circulation of money by the state has given way to the unification of regional currencies, which may subsequently pave way for a common currency for the world as a whole or at the best few currencies. Debates on the replacement of national currency with the common currency by all the countries in a specified region, as in the case of the Euro, have gathered momentum at the regional level in various parts of the globe. For instance, the idea of a common currency for SAARC countries (South Asian Association for Regional Cooperation), ASEAN countries, regional African countries, and so on are on the conceptual level at various stages.

Regional unification of currencies The move towards a regional currency regime need not be considered as a surrender of sovereignty by the nations in the unification process. Rather it is a process of coming together by various nations recognizing the need for unification, justified by the benefits of currency unification in the economic development of the constituent countries. According to Cohen (2003, p. 2), the emergence of regional currencies can be regarded as a logical corollary of the intense competitive contest among monies – a Darwinian struggle where, ultimately, only the fittest may survive.

The decision of a country with regard to the unification of currencies is dependent upon several factors such as the size of the economy, stability in the financial markets, exposure to international trade, the political situation in the country, and its diplomatic relationship with the other countries.