ABSTRACT
The literature of economic integration theory concentrates on two main forms: Customs Unions and Monetary Unions.1 They can be defined as a group of geographical entities that have agreed both to abolish internal barriers to trade and to adopt common external tariffs in the case of the former and a common currency in the case of the latter.2 In handbooks on economic integration, Monetary Union is often presented as a higher form of economic integration than Customs Union, sometimes implying that it can be achieved only at a later stage in the process of convergence of the participating members. As a consequence, a Monetary Union is defined to contain a Customs Union. In principle, however, the two concepts can very well be separated, and we shall do so in this chapter. Customs Union and Monetary Union theory are dealt with in the next two sections respectively. The subsequent section combines the results obtained, and applies them to test the economic rationality of the processes of integration and disintegration in Europe. The final section concludes.
