Is a common currency area feasible for East Asia? A multivariate structural VAR approach
AbstractIn this paper the feasibility of forming a common currency area in East Asia is investigated. A three-variable SVAR model is employed to identify three types of shocks, i.e. global, regional, and domestic shocks. The empirical results do not provide strong support for forming a common currency area in this region because the symmetric "prevalent shock" cannot be defined. However, it is found that since the late 1990s the importance of asymmetric domestic shocks has declined while that of symmetric global and regional shocks has increased. Furthermore, East Asia is as symmetric as the Euro Area in terms of the correlation of global and regional shocks. The findings suggest that most East Asian economies have become symmetric in terms of economic shocks, and imply that a common currency area may become viable through deepening regional integration.
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Bibliographic InfoPaper provided by Osaka School of International Public Policy, Osaka University in its series OSIPP Discussion Paper with number 09E006.
Length: 24 pages
Date of creation: Jul 2009
Date of revision:
Common currency area; Monetary integration; OCA; SVAR; East Asia;
Find related papers by JEL classification:
- F3 - International Economics - - International Finance
- F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-07-28 (All new papers)
- NEP-CBA-2009-07-28 (Central Banking)
- NEP-MON-2009-07-28 (Monetary Economics)
- NEP-SEA-2009-07-28 (South East Asia)
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