In recent years, there has been an increase in interest in currency unions, internationally. The formation of currency union in Organization of Islamic Cooperation (OIC) has drawn much attention of Islamic countries. This paper aims to investigate the effect of currency union formation on trade among 49 Islamic countries over the period of 1990-2012 by OCA and Augmented Gravity Model (AGM). The results show that common language, borders, trade unions had positive and significant effect on trade in OIC countries; and being landlocked and distance between source and host countries had negative and significant effect on bilateral trade. Also, the currency union had positive and significant effect on trade in OIC countries. The evidence thus suggests that regional currency union arrangements stimulate bilateral trade in OIC, rigorously
