An Empirical Assessment Of The Optimum Currency Areas Theory: Turkey And The Emu Countries

Abstract

This study aims to analyze Turkey and the EMU countries in the light of criteria suggested by the optimum currency areas (OCA) theory and the Maastricht criteria. To this end, we follow a novel approach with an application of fuzzy c-means (FCM) clustering. The results show that the application of FCM clustering to the OCA criteria produces better clustering structure compared to the Maastricht criteria. In addition, in the analysis with the Maastricht criteria, the control group countries, Canada and Japan, are not distinguished from the European countries. Furthermore, Turkey remains as a separate group than the European countries with respect to both the OCA criteria and the Maastricht criteria.