Are Denmark, Norway and Sweden an optimum currency area?

Abstract

This paper investigates the possibility of Denmark, Norway and Sweden to form an optimum currency area. Based on the theories of optimum currency areas, such as Mundell’s Optimum Currency Areas, a few economical factors are chosen and analyzed. These factors are: the differences in real exchange rate, the economic covariation, the degree of openness and the relationship between inflation and unemployment. Statistical data from 1971 until 2013 is analyzed and the results indicate that it might be possible for Denmark, Norway and Sweden to form an optimum currency area. However, there are more criteria, which need to be analyzed, before drawing a conclusion regarding the possibility for the countries to form an optimum currency area.