An analysis of East Asian currency area: Bayesian dynamic factor model approach
AbstractThere has recently been an increasing interest in the establishment of a common currency area in East Asia in the aftermath of the East Asian financial crisis. In this article I examine the desirability and feasibility of forming a currency area in the region by checking the symmetry of shocks as an important criterion of the theory of Optimum Currency Area. I employ a dynamic factor model to decompose aggregate output into world, regional and country-specific components and estimate the model using a Gibbs sampling simulation. Persistent properties of those components are examined and variance decomposition analysis is performed to investigate the role of each component in output variance. The European Monetary Union, with the successful launch of the euro, is the natural benchmark for comparison. Based on variance analysis, it is found that East Asian countries, on average, are less plausible candidates for a currency area than European counterparts. However, a subgroup of countries in East Asia is as qualified as those in Europe. Given the ongoing integration in East Asia, it is not premature to prepare for such a currency area in this region.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Taylor & Francis Journals in its journal International Review of Applied Economics.
Volume (Year): 24 (2010)
Issue (Month): 1 ()
Contact details of provider:
Web page: http://www.tandfonline.com/CIRA20
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- de Truchis, Gilles & Keddad, Benjamin, 2013.
"Southeast Asian monetary integration: New evidences from fractional cointegration of real exchange rates,"
Journal of International Financial Markets, Institutions and Money,
Elsevier, vol. 26(C), pages 394-412.
- Gilles de Truchis & Benjamin Keddad, 2012. "South East Asian Monetary Integration: New Evidences from Fractional Cointegration of Real Exchange Rates," AMSE Working Papers 1229, Aix-Marseille School of Economics, Marseille, France, revised 05 Nov 2012.
- Gilles de Truchis & Benjamin Keddad, 2012. "South East Asian Monetary Integration: New Evidences from Fractional Cointegration of Real Exchange Rates," William Davidson Institute Working Papers Series wp1039, William Davidson Institute at the University of Michigan.
- Gilles De Truchis & Benjamin Keddad, 2012. "South East Asian Monetary Integration: New Evidences from Fractional Cointegration of Real Exchange Rates," Working Papers halshs-00793503, HAL.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael McNulty).
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.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with 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 profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.