IDEAS home Printed from https://ideas.repec.org/a/fec/journl/v2y2007i4p594-606.html
   My bibliography  Save this article

Optimal currency area: An empirical study on selected East Asian economies

Author

Listed:
  • GAO Haihong

    (Institute of World Economics and Politics, Chinese Academy of Social Sciences, Beijing 100732, China)

Abstract

This paper empirically examines the potential for forming an Optimal Currency Area (OCA) in selected Asian economies, including ASEAN countries, China, Japan and Korea, by testing Generalized Purchasing Power Parity (G-PPP) using Johansen's cointegration approach. We investigate the long-term real exchange rate of six sub-groups of countries in order to find whether they share the common stochastic trend, as in an OCA, predicted by the G-PPP theory. The date set is monthly based between 1994 and 2003. We find that five sub-groups out of the six in total appear to have significant evidence of the existence of OCAs. This finding reflects the fact that those economies are actually highly integrated and interrelated to each other, and the current regional monetary arrangement (such as, the Chiang Mai Initiative (CMI)) is far lagging behind the real economic link in East Asia.

Suggested Citation

  • GAO Haihong, 2007. "Optimal currency area: An empirical study on selected East Asian economies," Frontiers of Economics in China-Selected Publications from Chinese Universities, Higher Education Press, vol. 2(4), pages 594-606, December.
    • Handle: RePEc:fec:journl:v:2:y:2007:i:4:p:594-606
    as

    Download full text from publisher

    File URL: http://journal.hep.com.cn/fec/EN/10.1007/s11459-007-0030-0
    Download Restriction: no
    ---><---

    More about this item

    Keywords

    optimal currency area (OCA); generalized purchasing power parity (G-PPP); real exchange rate; East Asian economies;
    All these keywords.

    JEL classification:

    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fec:journl:v:2:y:2007:i:4:p:594-606. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Frank H. Liu (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.