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The endogeneity of the optimum currency area criteria: an application to ASEAN

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  • George Tawadros

Abstract

In this paper, the endogeneity hypothesis of the optimum currency area criteria is tested for seven economies who are members of the Association of South East Asian Nations (ASEAN). The empirical evidence presented shows that greater trade flows between these countries will lead to increased specialisation according to their comparative advantage, resulting in more divergent business cycles across ASEAN. As such, the endogeneity hypothesis of the optimum currency area criteria is rejected. This finding suggests that the ASEAN economies have not yet achieved a sufficient degree of harmonisation and convergence in their business cycles through trade, implying that these countries are not yet synchronised enough to enjoy the benefits of monetary unification.

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  • George Tawadros, 2008. "The endogeneity of the optimum currency area criteria: an application to ASEAN," International Economic Journal, Taylor & Francis Journals, vol. 22(3), pages 335-343.
    • Handle: RePEc:taf:intecj:v:22:y:2008:i:3:p:335-343
    DOI: 10.1080/10168730802288141
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    References listed on IDEAS

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