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A Single Currency for Pacific Island Countries: a Revisit

Author

Listed:
  • Jayaraman, T.K.

    () (The University of the South Pacific, Fiji Islands)

  • Choong, Chee-Keong

    () (Universiti Tunku Abdul Rahman, Malaysia)

Abstract

This paper re-visits the subject of a common currency for the Pacific region, comprising 14 Pacific island countries (PICs) and the region’s two advanced countries, Australia and New Zealand. The PICs are highly dependent on Australia and New Zealand for trade in goods and services and aid inflows. Earlier studies on regional common currency, which dealt with certain aspects of the optimum currency area conditions, took into consideration three kinds of shocks, namely shocks in world output, domestic output and price levels. Since PICs’ growth is influenced by regional developments to a larger degree than by world developments, this paper takes into consideration regional shocks, in addition to shocks in global and national outputs. Using variance decomposition analysis in this paper we investigate whether PICs and the region’s two advanced countries could be suitable candidates for a currency union.

Suggested Citation

  • Jayaraman, T.K. & Choong, Chee-Keong, 2009. "A Single Currency for Pacific Island Countries: a Revisit," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 24, pages 321-342.
  • Handle: RePEc:ris:integr:0476
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    Cited by:

    1. Willie Lahari, 2010. "Permanent and Transitory Shocks among Pacific Island Economies - Prospects for a Pacific Islands Currency Union," Working Papers 1001, University of Otago, Department of Economics, revised Feb 2010.

    More about this item

    Keywords

    optimum currency area; shocks; pacific island countries; Australia and New Zealand;

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission

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