Recent political discussions in Australia have suggested that Pacific Island nations should “dollarize” to the Australian dollar. This is seen as a way to stabilise the economies of the region, which have been fraught with both political and economic uncertainty. Standard currency analysis techniques indicate that dollarization to the US dollar may be preferable to dollarization with the Australian dollar, as strong existing links with the US dollar are indicated, while there is less evidence to support existing relationships with the Australian dollar. With Asia likely to overtake Australia as a dominant trading partner for major Pacific Island economies, a discussion of currency reform in the Pacific should at least consider US dollarization, as Australia’s economic influence may not be as significant as previously assumed.
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Publisher Info
Paper provided by East Asian Bureau of Economic Research in its series Macroeconomics Working Papers with number
546.
Length: 34 pages Date of creation: Feb 2005 Date of revision: Handle: RePEc:eab:macroe:546
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Find related papers by JEL classification: F31 - International Economics - - International Finance - - - Foreign Exchange E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
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