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Optimum Currency Area Criteria and Volatility in ASEAN

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Author Info

  • Tajul Ariffin Masron

    ()
    (School of Management, Universiti Sains Malaysia, 11800 USM Pulau Pinang, Malaysia)

  • Zulkornain Yusop

    (Faculty of Economics and Management, Universiti Putra Malaysia, 43400 UPM Serdang, Selangor, Malaysia)

Abstract

The goal of regional integration is to promote greater macroeconomic coordination, and reduce the degree of macroeconomic volatility, in particular exchange rate fluctuations. This paper investigates how well optimum currency area (OCA) variables will work in the context of the ASEAN region when the Singapore Dollar, given its relative stability, is used as an anchor currency. The results indicate that OCA variables play an important role in explaining bilateral exchange rate volatility. In addition, exchange rate volatility exerts a negative impact on bilateral trade and gross domestic product (GDP). It is also a source of divergence among ASEAN members.

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File URL: http://web.usm.my/journal/aamjaf/vol2-2/2-2-1.pdf
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Bibliographic Info

Article provided by Penerbit Universiti Sains Malaysia in its journal Asian Academy of Management Journal of Accounting and Finance.

Volume (Year): 2 (2006)
Issue (Month): 2 ()
Pages: 1-18

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Handle: RePEc:usm:journl:aamjaf00202_1-18

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Web page: http://web.usm.my/aamj/
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Related research

Keywords: optimum currency area; bilateral trade; exchange rate volatility; asymmetric shock; size;

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Cited by:
  1. masron, Tajul arrifin & Mohd naseem niaz, Ahmad, 2008. "Export, Economic Integration and Exchange Rate Volatility in Turkey and Malaysia," MPRA Paper 41519, University Library of Munich, Germany.

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