The Optimum Currency Area (OCA) theory, developed by Robert Mundell, identifies key criteria for a successful monetary union including:

AHigh labor mobility and wage-price flexibility across member states

BIdentical tax structures in all nations

CStrict import quotas on non-member states

DSingle political head of state

Explanation

Mundell’s OCA criteria emphasize labor mobility, capital openness, and risk-sharing mechanisms to handle asymmetric economic shocks.

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