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The prospects of a monetary union in East Asia

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  • Lee, Grace H.Y.
  • Koh, Sharon G.M.

Abstract

This paper assesses the empirical desirability of the East Asian economies to form a monetary union. The Structural Vector Autoregression (VAR) method is employed to assess the nature of macroeconomic disturbances among the East Asian countries, as a preliminary guide in identifying potential candidates for forming an Optimum Currency Area (OCA). In comparison with European countries, East Asia has less symmetric underlying structural shocks but the speed of adjustment to shocks is much faster. The empirical results suggest that there exists a scope among some small sub-regions, comprising mainly of ASEAN countries, for potential monetary integration. The finding of an increased symmetry of shocks among countries after the Asian Financial crisis indicates that the regional policy-coordinating effort after the crisis has put the region on the right track if monetary union is a desired goal.

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Bibliographic Info

Article provided by Elsevier in its journal Economic Modelling.

Volume (Year): 29 (2012)
Issue (Month): 2 ()
Pages: 96-102

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Handle: RePEc:eee:ecmode:v:29:y:2012:i:2:p:96-102

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Web page: http://www.elsevier.com/locate/inca/30411

Related research

Keywords: Optimum currency area; Monetary union; Vector autoregression; Exchange rate; East Asia;

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References

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  1. Olivier Jean Blanchard & Danny Quah, 1988. "The Dynamic Effects of Aggregate Demand and Supply Disturbance," Working papers 497, Massachusetts Institute of Technology (MIT), Department of Economics.
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  6. M Azali & R C Royfaizal & C Lee, 2009. "Japanese Yen as an Alternative Vehicle Currency in Asian Countries," The IUP Journal of Monetary Economics, IUP Publications, vol. 0(2), pages 6-16, May.
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  8. Lee, Grace H.Y. & Azali, M., 2010. "The endogeneity of the Optimum Currency Area criteria in East Asia," Economic Modelling, Elsevier, vol. 27(1), pages 165-170, January.
  9. Moneta, Fabio & Rüffer, Rasmus, 2009. "Business cycle synchronisation in East Asia," Journal of Asian Economics, Elsevier, vol. 20(1), pages 1-12, January.
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  12. Junichi Goto & Koichi Hamada, 1994. "Economic Preconditions for Asian Regional Integration," NBER Chapters, in: Macroeconomic Linkage: Savings, Exchange Rates, and Capital Flows, NBER-EASE Volume 3, pages 359-388 National Bureau of Economic Research, Inc.
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Citations

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Cited by:
  1. Gilles Dufrénot & Benjamin Keddad, 2013. "Business Cycles Synchronization in East Asia: A Markov-Switching Approach," Working Papers halshs-00861901, HAL.
  2. Andrea Bonilla Bolanos, 2012. "External vulnerabilities and economic integration. Is the Union of South American Nations a promising project?," Working Papers 1238, Groupe d'Analyse et de Théorie Economique (GATE), Centre national de la recherche scientifique (CNRS), Université Lyon 2, Ecole Normale Supérieure.
  3. Hideaki Hirata & M. Ayhan Kose & Christopher Otrok, 2013. "Regionalization vs. Globalization," Koç University-TUSIAD Economic Research Forum Working Papers 1302, Koc University-TUSIAD Economic Research Forum.
  4. Huh , Hyeon-seung & Park, Cyn-Young, 2013. "Examining the Determinants of Food Prices in Developing Asia," ADB Economics Working Paper Series 370, Asian Development Bank.
  5. Andrea Bonilla, 2014. "External vulnerabilities and economic integration. Is the Union of South American Nations a promising project ?," Working Papers halshs-00945044, HAL.
  6. Huh, Hyeon-seung & Kim, David & Kim, Won Joong & Park, Cyn-Young, 2013. "A Factor-Augmented Vector Autoregression Analysis of Business Cycle Synchronization in East Asia and Implications for a Regional Currency Union," ADB Economics Working Paper Series 385, Asian Development Bank.
  7. Hyeon-seung Huh & David Kim & Won Joong Kim & Cyn-Young Park, 2013. "A Factor-augmented VAR Analysis of Business Cycle Synchronization in East Asia and Implications for a Regional Currency Union," Working papers 2013rwp-58, Yonsei University, Yonsei Economics Research Institute.
  8. Emilio Espino & Julian Kozlowski & Juan M. Sánchez, 2013. "Regionalization vs. globalization," Working Papers 2013-002, Federal Reserve Bank of St. Louis.

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