Rules of Origin for Preferential Trading Arrangements: Implications for the ASEAN Free Trade Area of EU and US Experience
AbstractThis 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 InfoArticle provided by Center for Economic Integration, Sejong University in its journal Journal of Economic Integration.
Volume (Year): 22 (2007)
Issue (Month): ()
Currency union; Exchange rate union; Optimum currency areas; Northeast Asia;
Other versions of this item:
- Cadot, Olivier & Melo, Jaime de, 2007. "Rules of Origin for Preferential Trading Arrangements: Implications for the ASEAN Free Trade Area of EU and US Experience," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 22, pages 288-319.
- Cadot, Olivier & de Melo, Jaime & Portugal-Perez, Alberto, 2006. "Rules of origin for preferential trading arrangements : implications for the ASEAN Free Trade Area of EU and U.S. experience," Policy Research Working Paper Series 4016, The World Bank.
- F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
- F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
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