Response of Economic Variables in ASEAN-5 to U.S. Economic Growth

The ASEAN Economic Community is scheduled to be formally implemented in 2015 and expected to bring about freedom in the movement of production factors, goods, services and labor across the member countries. It is seen to lead to the next phase with a common currency, which should facilitate transnational transactions. In order for member countries to use a common currency, they must have compatible economic variables, according to the optimum currency theory. This study examines synchronicity of economic variables in ASEAN-5 as a result of the shock in the US economy. The secondary data from the first quarter of 1980 to the fourth quarter of 2011 were analyzed. The vector autoregression model was applied. The findings reveal that the shock in the U.S. economy will affect economic variables in ASEAN-5 countries differently: real GDP growth will have a decreasing response; exchange rate will have an increasing response. These two factors indicate a synchronicity of response within ASEAN-5 countries. Meanwhile, there is asynchronicity of response of consumer price index and real interest rate within the group. The study suggests the possibility of a monetary integration in ASEAN-5 provided that obstacles to economic activities are removed.