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Can South Asia Adopt a Common Currency?

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  • Sweta C. Saxena

    (University of Pittsburgh)

Abstract

The paper examines if the seven South Asian countries satisfy the criteria to form an optimal currency area. The empirical part of the paper reveals some positive attributes (such as the existence of positive shocks for major economies like India, Pakistan and Sri Lanka). The paper provides geo-political reasoning for more economic cooperation among the countries, suggesting areas where cooperation could be mutually beneficial to the economies. This paper argues that the benefits of a common currency would accrue from the peace that economic integration would bring between India and Pakistan. The paper also compares this region with Western Europe and Southeast Asia.

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File URL: http://128.118.178.162/eps/if/papers/0508/0508001.pdf
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Bibliographic Info

Paper provided by EconWPA in its series International Finance with number 0508001.

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Length: 44 pages
Date of creation: 07 Aug 2005
Date of revision:
Handle: RePEc:wpa:wuwpif:0508001

Note: Type of Document - pdf; pages: 44
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Web page: http://128.118.178.162

Related research

Keywords: South Asia; SAARC; Monetary union; economic integration; optimal currency areas;

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References

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  1. Glick, Reuven & Rose, Andrew K, 2001. "Does a Currency Union Affect Trade? The Time Series Evidence," CEPR Discussion Papers 2891, C.E.P.R. Discussion Papers.
  2. International Monetary Fund, 2005. "Crouching Tiger, Hidden Dragon," IMF Working Papers 05/101, International Monetary Fund.
  3. Tamim Bayoumi, 1992. "The Effect of the ERM on Participating Economies," IMF Staff Papers, Palgrave Macmillan, vol. 39(2), pages 330-356, June.
  4. Frankel, Jeffrey A & Rose, Andrew K, 1998. "The Endogeneity of the Optimum Currency Area Criteria," Economic Journal, Royal Economic Society, vol. 108(449), pages 1009-25, July.
  5. Rose, Andrew K & Engel, Charles, 2002. "Currency Unions and International Integration," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 34(4), pages 1067-89, November.
  6. Andrew Rose, 2004. "A Meta-Analysis of the Effect of Common Currencies on International Trade," NBER Working Papers 10373, National Bureau of Economic Research, Inc.
  7. Olivier Jean Blanchard & Danny Quah, 1988. "The Dynamic Effects of Aggregate Demand and Supply Disturbances," NBER Working Papers 2737, National Bureau of Economic Research, Inc.
  8. Tamim Bayoumi & Paolo Mauro, 2001. "The Suitability of ASEAN for a Regional Currency Arrangement," The World Economy, Wiley Blackwell, vol. 24(7), pages 933-954, 07.
  9. Eichengreen, Barry, 1993. "European Monetary Unification," Journal of Economic Literature, American Economic Association, vol. 31(3), pages 1321-57, September.
  10. Hassan, M. Kabir, 2001. "Is SAARC a viable economic block? evidence from gravity model," Journal of Asian Economics, Elsevier, vol. 12(2), pages 263-290.
  11. Jeffrey A. Frankel & Andrew K. Rose, 2000. "Estimating the Effect of Currency Unions on Trade and Output," NBER Working Papers 7857, National Bureau of Economic Research, Inc.
  12. Valerie Cerra & Sandra A. Rivera & Sweta C. Saxena, 2005. "Crouching Tiger, Hidden Dragon: What Are the Consequences of China’s WTO Entry for India’s Trade?," International Trade 0508005, EconWPA.
  13. Andrew K. Rose & T. D. Stanley, 2005. "A Meta-Analysis of the Effect of Common Currencies on International Trade ," Journal of Economic Surveys, Wiley Blackwell, vol. 19(3), pages 347-365, 07.
  14. Catherine A. Pattillo & Paul R. Masson, 2001. "Monetary Union in West Africa (ECOWAS)," IMF Occasional Papers 204, International Monetary Fund.
  15. Andrew K. Rose, 2000. "One money, one market: the effect of common currencies on trade," Economic Policy, CEPR & CES & MSH, vol. 15(30), pages 7-46, 04.
  16. Frankel, Jeffrey A. & Rose, Andrew K., 1997. "Is EMU more justifiable ex post than ex ante?," European Economic Review, Elsevier, vol. 41(3-5), pages 753-760, April.
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Citations

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Cited by:
  1. Sweta C. Saxena, 2005. "Are Optimal Currency Areas Optimal for All? A Reassessment of the Case for Asian Monetary Union," International Finance 0508003, EconWPA.
  2. Pierre-Richard Agenor & Joshua Aizenman, 2008. "Capital Market Imperfections and the Theory of Optimum Currency Areas," NBER Working Papers 14088, National Bureau of Economic Research, Inc.
  3. Devanthran, Haritharan, 2009. "Interdependence of SAARC-7 countries: an empirical study of business cycles," MPRA Paper 32798, University Library of Munich, Germany.
  4. Chuku, Chuku, 2012. "The proposed eco: should West Africa proceed with a common currency?," MPRA Paper 43739, University Library of Munich, Germany.

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  1. Unión monetaria in Wikipedia Spanish ne '')
  2. Валютный союз in Wikipedia Russian ne '')
  3. Unión monetaria in Wikipedia Galician ne '')

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