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Optimum currency area in South Asia: A state space approach

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Author Info

  • Banik, Nilanjan
  • Biswas, Basudeb
  • Criddle, Keith R.

Abstract

This paper is an empirical investigation of the feasibility of an optimum currency area (OCA) in South Asia. Countries are good candidates for forming an OCA if their economies are similarly structured and if their economies share similar responses to exogenous shocks. That is, among other characteristics, good candidates for forming an OCA will share a coincident pattern of economic booms and recessions. We use a state space time series model with a stochastic trend to explore the extent to which the Indices of Industrial Production for South Asian nations share common dynamic responses to exogenous shocks.

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Bibliographic Info

Article provided by Elsevier in its journal International Review of Economics & Finance.

Volume (Year): 18 (2009)
Issue (Month): 3 (June)
Pages: 502-510

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Handle: RePEc:eee:reveco:v:18:y:2009:i:3:p:502-510

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Web page: http://www.elsevier.com/locate/inca/620165

Related research

Keywords: Optimum currency area South Asia State space modeling;

References

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  1. Frankel, Jeffrey A & Rose, Andrew K, 1996. "The Endogeneity of the Optimum Currency Area Criteria," CEPR Discussion Papers 1473, C.E.P.R. Discussion Papers.
  2. Atish R. Ghosh & Holger C. Wolf, 1994. "How Many Monies? A Genetic Approach to Finding Optimum Currency Areas," Working Papers 94-18, New York University, Leonard N. Stern School of Business, Department of Economics.
  3. Backus, David K & Kehoe, Patrick J, 1992. "International Evidence of the Historical Properties of Business Cycles," American Economic Review, American Economic Association, vol. 82(4), pages 864-88, September.
  4. Engel, Charles M & Rose, Andrew K, 2001. "Currency Unions and International Integration," CEPR Discussion Papers 2659, C.E.P.R. Discussion Papers.
  5. Olivier Jean Blanchard & Danny Quah, 1990. "The Dynamic Effects of Aggregate Demand and Supply Disturbances," NBER Working Papers 2737, National Bureau of Economic Research, Inc.
  6. Shinji Takagi, 1996. "The Yen and Its East Asian Neighbors, 1980-1995: Cooperation or Competition?," NBER Working Papers 5720, National Bureau of Economic Research, Inc.
  7. Michael Artis & Marion Kohler & Jacques Mélitz, 1998. "Trade and the Number of OCAs in the World," Open Economies Review, Springer, vol. 9(1), pages 537-568, January.
  8. Mills, Terence C & Holmes, Mark J, 1999. "Common Trends and Cycles in European Industrial Production: Exchange Rate Regimes and Economic Convergence," Manchester School, University of Manchester, vol. 67(4), pages 557-87, September.
  9. Cerchi, Marlene & Havenner, Arthur, 1988. "Cointegration and stock prices : The random walk on wall street revisited," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 333-346.
  10. Lumsdaine, Robin L. & Prasad, Eswar, 2002. "Identifying the Common Component of International Economic Fluctuations: A New Approach," IZA Discussion Papers 487, Institute for the Study of Labor (IZA).
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Cited by:
  1. Kim, Won Joong & Hammoudeh, Shawkat, 2013. "Impacts of global and domestic shocks on inflation and economic growth for actual and potential GCC member countries," International Review of Economics & Finance, Elsevier, vol. 27(C), pages 298-317.

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