It may not be implausible to suppose that there is some degree of money illusion in the bargaining process between unions and management (or frictions and lags having the same effects), but it is unrealistic to assume the extreme degree of money illusion that would have to exist in small currency areas. Since the necessary degree of money illusion becomes greater the smaller are currency areas, it is plausible to conclude that this also imposes an upper limit on the number of currency areas.