An economic and monetary union is a type of trade bloc which is composed of a economic union (common market and customs union) with a monetary union. It is to be distinguished from a mere monetary union (e.g. the Latin Monetary Union in the 19th century), which does not involve a common market. This is the fifth stage of economic integration. EMU is established through a currency-related trade pact. An intermediate step between pure EMU and a complete economic integration is the fiscal union.
A currency union (also known as monetary union) is where two or more states share the same currency, though without their necessarily having any further integration such as an Economic and Monetary Union, which has in addition a customs union and a single market.
There are three types of currency unions:
1. Informal - unilateral adoption of foreign currency
2. Formal - adoption of foreign currency by virtue of bilateral or multilateral agreement with the issuing, sometimes supplemented by issue of local currency in currency peg regime
3. Formal with common policy - establishment by multiple countries of common monetary policy and issuing authority for their common currency
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