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Implementation Of Optimum Currency Area Criteria And Its Volatility: Case Study Asean-5+3

Author

Listed:
  • Dimas Bagus Wiranata Kusuma

    (University Malaysia)

  • Arief Dwi Putranto

    (University Malaysia)

Abstract

This paper is aiming to elaborate the case of how exchange rate volatility (ERV), which is supposedly considered to form optimum currency area (OCA), can be reduced in order justify the feasibility of the OCA idea within ASEAN5 plus three. Interestingly, the results provide some evidences that the ASEAN5+3 are considered not really ready to form OCA. It corroborates the existing opinion that the different in economic structure and its policies over foreign environment are becoming some barriers and challenging area to synchronize in the following time. The positive impacts AS to ERV which are incurred in ASEAN5+3 economies indicate the existence of inappropriate condition to form OCA since there are no similar shocks across a monetary union»s participating countries. Under such condition, it would foster the costs of forgoing the exchange rate as a shock absorbing mechanism. It deserves to argue that those observed countries still are resisting their existing regime since they are till believing that they begin to establish the system of monetary which are able to absorb any possible shocks in regards of their SIZE. In sum, the ASEAN5+3 countries are considered to fulfilling the requirement to form currency optimum area which are able to main their stable currency.

Suggested Citation

  • Dimas Bagus Wiranata Kusuma & Arief Dwi Putranto, 2010. "Implementation Of Optimum Currency Area Criteria And Its Volatility: Case Study Asean-5+3," Bulletin of Monetary Economics and Banking, Bank Indonesia, vol. 13(2), pages 1-28, October.
    • Handle: RePEc:idn:journl:v:13:y:2010:i:2g:p:1-28
    DOI: https://doi.org/10.21098/bemp.v13i2.390
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    More about this item

    Keywords

    Optimum Currency Area; a Single Currency; Exchange Rate Volatility; Stability;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • F15 - International Economics - - Trade - - - Economic Integration
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration

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