At the outset of a discussion of monetary integration, the characteristics that are essential for a monetary union as well as those necessary for the continued and successful existence of the monetary union must be considered.
First, in any monetary union, either there must be a single currency, or if there are several currencies, these currencies must be fully convertible, in one another, at immutably fixed exchange rates thus effectively creating a single currency.
Second, the immutability of fixed exchange rates depends upon mutually consistent monetary policies within the union. Thus, there must be an arrangement whereby monetary policy for the union, especially regulations affecting the commercial banks' ability to create money, is determined at the union level.
Finally, there must be a single external exchange rate policy, because there can be only one rate of exchange between an external currency and union currency. To achieve such an end, the national authorities must relinquish individual control over their international reserves and invest control in a union authority.
Raines, J. Patrick. 1983. "The Theoretical Rationale for a Common European Currency Revisited." E.C.R.S.B. 83-1. Robins School of Business White Paper Series. University of Richmond, Richmond, Virginia.