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Rules of Origin for Preferential Trading Arrangements: Implications for the ASEAN Free Trade Area of EU and US Experience

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Author Info

  • Cadot, Olivier

    ()
    (University of Lausanne)

  • Melo, Jaime de

    (Drexel University)

Abstract

This paper examines whether or not the Northeast Asian economies, namely, China, Japan, Korea, and Taiwan, can form a currency union, where a single currency and a uniform monetary policy are adopted, or an exchange rate union where all the currencies are pegged to an internal or external currency or an optimum currency basket. The analysis of correlations of supply shocks, exchange rate shocks, monetary shocks, and demand shocks, which are estimated applying the structural VAR model with identification restrictions imposed, to the data for the period from 1970 through 2004, shows that shocks of these economies are not symmetric, in general, implying that the Northeast Asian economies are not ready yet to form a common currency union. However, it is found that the Northeast Asian countries can form an exchange rate union with a major currency basket, which consists of the U.S. dollar, the euro and the Japanese yen, as an anchor currency. The paper also examines the option of pegging to a basket of regional currencies, similar to the Asian Currency Unit (ACU), and discusses policy implications.

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Bibliographic Info

Article provided by Center for Economic Integration, Sejong University in its journal Journal of Economic Integration.

Volume (Year): 22 (2007)
Issue (Month): ()
Pages: 256-287

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Handle: RePEc:ris:integr:0394

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Web page: http://econo.sejong.ac.kr/
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Related research

Keywords: Currency union; Exchange rate union; Optimum currency areas; Northeast Asia;

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References

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  1. O G Dayaratna Banda & John Whalley, 2005. "Beyond Goods and Services: Competition Policy, Investment, Mutual Recognition, Movement of Persons, and Broader Cooperation Provisions of Recent FTAs involving ASEAN Countries," NBER Working Papers 11232, National Bureau of Economic Research, Inc.
  2. Kala Krishna, 2005. "Understanding Rules of Origin," NBER Working Papers 11150, National Bureau of Economic Research, Inc.
  3. Miriam Manchin, 2006. "Preference Utilisation and Tariff Reduction in EU Imports from ACP Countries," The World Economy, Wiley Blackwell, vol. 29(9), pages 1243-1266, 09.
  4. Jose Anson & Olivier Cadot & Antoni Estevadeordal & Jaime de Melo & Akiko Suwa-Eisenmann & Bolorma Tumurchudur, 2004. "Rules of origin in north-south preferential trading arrangements with an application to NAFTA," Research Unit Working Papers 0406, Laboratoire d'Economie Appliquee, INRA.
  5. Dixit, Avinash K & Grossman, Gene M, 1982. "Trade and Protection with Multistage Production," Review of Economic Studies, Wiley Blackwell, vol. 49(4), pages 583-94, October.
  6. Marcelo Olarreaga & Çaglar Özden, 2005. "AGOA and Apparel: Who Captures the Tariff Rent in the Presence of Preferential Market Access?," The World Economy, Wiley Blackwell, vol. 28(1), pages 63-77, 01.
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Cited by:
  1. Portugal-Perez, Alberto & Wilson, John S., 2009. "Why trade facilitation matters to Africa," World Trade Review, Cambridge University Press, vol. 8(03), pages 379-416, July.
  2. Innwon Park & Soonchan Park, 2011. "Best practices for regional trade agreements," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 147(2), pages 249-268, June.
  3. DeMaria, Federica & Drogue, Sophie & Matthews, Alan, 2008. "Agro-Food Preferences in the EU's GSP Scheme: An Analysis of Changes between 2004 and 2006," Working Papers 6151, TRADEAG - Agricultural Trade Agreements.
  4. Ram Upendra Das, 2010. "Rules of Origin under Regional Trade Agreements," Trade Working Papers 22791, East Asian Bureau of Economic Research.
  5. Masahiro Kawai & Ganeshan Wignaraja, 2009. "The Asian “Noodle Bowl”:Is It Serious for Business?," Working Papers id:1936, eSocialSciences.

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