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The Asean-5 Future Currency: Maastricht Criteria

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Author Info
M., Azali
Wong , K. S. Kelly
Lee, C.
Shafinaz, Ahmad Nazar

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Abstract

In this recent decade, many of the economists and policymakers attempted to investigate the suitability of the East Asian region to form a currency union and based on the European countries experience as a benchmark. This study aims to investigate the long-run real convergence in GDP per capita growth among Malaysia, Thailand, Singapore, Indonesia, and the Philippines, over 1978 to 2004. The Dickey-Fuller (DF) and Augmented Dickey-Fuller (ADF) unit root tests were conducted at first difference of GDP per capita for each country; the results demonstrated that all countries GDP per capita are stationary at first difference. The results of the Bound Testing Approach (Auto-Regression Distributed Lag (ARDL)) indicated that there is a long run relationship between variables in the Maastricht Criteria. The results showed that interest rate, inflation rate and the debt ratio experience that negative relationship to the GDP per capita. However, the exchange rate and surplus (or deficit) ratio shown the positive related to the GDP per capita. Therefore, the findings showed the ASEAN 5 countries have fulfilled the Maastricht Criteria with consistent to expected sign(s) except for Singapore’ exchange rate and Indonesia’s debt ratio. Hence, those ASEAN 5 countries in this study have potential to form a single currency.

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Publisher Info
Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 10272.

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Date of creation: 2007
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Handle: RePEc:pra:mprapa:10272

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Related research
Keywords: Monetary Union (MU); Bound Test (ARDL); Maastricht Criteria; Single Currency;

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Find related papers by JEL classification:
E0 - Macroeconomics and Monetary Economics - - General
F0 - International Economics - - General

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  1. Thornton, John & Goglio, Alessandro, 2002. "Regional Bias and Intra-regional Trade in Southeast Asia," Applied Economics Letters, Taylor and Francis Journals, vol. 9(4), pages 205-08, March. [Downloadable!] (restricted)
  2. Bruno, Michael & Easterly, William, 1998. "Inflation crises and long-run growth," Journal of Monetary Economics, Elsevier, vol. 41(1), pages 3-26, February. [Downloadable!] (restricted)
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  3. Bardsen, Gunnar, 1989. "Estimation of Long Run Coefficients in Error Correction Models," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 51(3), pages 345-50, August.
  4. John Y. Campbell & Pierre Perron, 1991. "Pitfalls and Opportunities: What Macroeconomists Should Know About Unit Roots," NBER Chapters, in: NBER Macroeconomics Annual 1991, Volume 6, pages 141-220 National Bureau of Economic Research, Inc. [Downloadable!]
    Other versions:
  5. Paul, Satya & Kearney, Colm & Chowdhury, Kabir, 1997. "Inflation and Economic Growth: A Multi-country Empirical Analysis," Applied Economics, Taylor and Francis Journals, vol. 29(10), pages 1387-1401, October. [Downloadable!] (restricted)
  6. Chee-Keong Choong & Siong-Hook Law & Zulkornain Yusop & Soo Siew Choo, 2005. "Export-led Growth Hypothesis in Malaysia: A Revisit," Icfai University Journal of Monetary Economics, Icfai Press, vol. 0(4), pages 26 - 42, November.
  7. M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326. [Downloadable!]
  8. Eric M. Engen & Jonathan Skinner, 1992. "Fiscal Policy and Economic Growth," NBER Working Papers 4223, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  9. Alberto Alesina & Silvia Ardagna & Roberto Perotti & Fabio Schiantarelli, 1999. "Fiscal Policy, Profits, and Investment," NBER Working Papers 7207, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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