An argument against optimum currency areas (OCA) is that the single currency and the common interest rate used in an OCA would mean one-size-fits-all monetary policy. Explain this argument

The first 200 words of this essay...

An argument against optimum currency areas (OCA) is that the single currency and the common interest rate used in an OCA would mean "one-size-fits-all" monetary policy. Explain this argument, and consider whether - and under what conditions - it might be important.

According to the theory first developed by Mundell (1961)[1] in order to be optimal, a currency area must be highly economically integrated, in that there is a free and substantial movement of goods and services, capital and labour. This would eliminate speculation and mean a great benefit from the elimination of transaction costs and uncertainty over exchange rates, less uncertainty over returns on investment and purchasing power of income across boundaries, and the labour markets would become more flexible and competitive, allowing workers broader horizons and better prospects. In terms of real- world occurrences, these were some of the main arguments put forward in support of the creation of the Euro as a single currency for many EU members and earlier, the European exchange rate mechanism (ERM) which pegged currencies in for these same reasons, and in preparation for the single currency. In the theory, there is little or no distinction between the two (a common currency