Assessing the feasibility of optimum currency area in the OIC countries: using fuzzy and hard clustering algorithms

Assessing the feasibility of optimum currency area in OIC countries: using fuzzy and hard clustering algorithmAbstractThe Organization of Islamic Cooperation (OIC) was established in 1971 and includes 57 Islamic countries. The most important goal of this organization is strengthening and expanding political, economic, and commercial ties and creating a common market among its member countries. Considering the successful experience of Euro area, it might be possible that a common currency area could help the OIC countries to achieve the integration. Therefore, the purpose of this study is to investigate the possibility of forming a common currency area among the OIC countries. Based on the convergence criteria presented in the optimum currency area literature, the study uses two different clustering algorithms, i.e. fuzzy and hard clustering methods to cluster the OIC countries. The results show that there are adequate similarities in the economic structures of the Arab Economic Union (AEU) countries. Therefore it seems plausible to create a common currency area among the AEU countries. In addition, a subgroup of the Economic Cooperation Organization (ECO) countries also can join this common monetary union.