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A dollar or yen currency union in East Asia

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  • Lim, Lee K.

Abstract

There are pros and cons for different countries to join a union and adopt a common currency. The European economic and monetary union is viewed to generate fewer costs and deliver greater benefits to its members. Several studies evaluate whether natural currency areas emerge based on historical pattern of international trade and of co-movements of prices and outputs, and found a well-defined dollar and euro areas but no clear yen area. This paper investigates the prospect of a dollar or yen currency union in the East Asia region. Different time series tests of income convergence are used to determine whether increased trade and financial integration has led to currency convergence. The countries included in this study are the high-performing East Asian economies, namely Japan, Hong Kong, South Korea, and the five founding ASEAN member countries.

Suggested Citation

  • Lim, Lee K., 2005. "A dollar or yen currency union in East Asia," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 68(5), pages 507-516.
    • Handle: RePEc:eee:matcom:v:68:y:2005:i:5:p:507-516
    DOI: 10.1016/j.matcom.2005.02.033
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    References listed on IDEAS

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    1. Alberto Alesina & Robert J. Barro, 2002. "Currency Unions," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 117(2), pages 409-436.
    2. Bernard, Andrew B & Durlauf, Steven N, 1995. "Convergence in International Output," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 10(2), pages 97-108, April-Jun.
    3. Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-1580, November.
    4. Robert Barro & Silvana Tenreyro, 2007. "Economic Effects Of Currency Unions," Economic Inquiry, Western Economic Association International, vol. 45(1), pages 1-23, January.
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    Cited by:

    1. Maria Estela Varua & Arlene Garces-Ozanne & Rachel Benic, 2010. "Evaluating economic integration in ASEAN: perspectives from a cluster analysis," Asia-Pacific Development Journal, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP), vol. 17(2), pages 43-63, December.
    2. Shafighi, Najla & Gharleghi, Behrooz, 2016. "Feasibility of a currency union in East Asia using the five-variable structural vector autoregressive model," Economic Analysis and Policy, Elsevier, vol. 52(C), pages 45-54.
    3. Reza Moosavi Mohseni & M. Azali, 2014. "Monetary Integration and Optimum Currency Area in ASEAN+3: What We Need for a New Framework?," International Journal of Economics and Financial Issues, Econjournals, vol. 4(2), pages 277-285.
    4. Jeon, Bang Nam & Zhang, Hongfang, 2007. "A currency union or an exchange rate union: evidence from Northeast Asia," MPRA Paper 36622, University Library of Munich, Germany, revised 01 Feb 2012.

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