Commercial and Monetary Integration Processes: Are They Complementary?

Traditional economic integration theory states that the formation of and economic union will effect both the member and non-member countries. This paper adds to traditional theory on economic integration by studying how non-member countries carry out their monetary policy in order tp counter those effects. Furthermore we prove that the formation of a customs union may increase monetary integration among non-members. Specifically it can be said that the greater the economic integration among countries the greater their incentives to currency zones. Therefore both, commercial and monetary integration processes may be considered as complementary.