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[Music] one of the most interesting theories of international trade is the theory of oca an acronym for optimum currency areas it was developed by mandel and mckinnon during 1960s it is basically a geographical area in which a single currency would create greater economic benefit in particular countries that share strong economic ties may benefit from a common currency this allows for closer integration of capital markets and facilitates trade one such example of oca is the euro but why is it done and oca is formed mainly for three reasons first to eliminate uncertainty that rises when exchange rates are not fixed second to encourage producers to view the entire area as a single market and lastly to benefit from greater economies of scale of production however theres a flip side to oca it results in a loss of each countrys ability to direct their fiscal and monetary policy interventions to stabilize their individual economies