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The Asian Currency Unit (ACU): exploring alternative currency weights

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  • Victor Pontines
  • Ramkishen Rajan

Abstract

While most observers concur that the time is not ripe for Asia to consider a common currency, there has been some discussion about the possible creation of an Asian Currency Unit (ACU). This paper examines the specific issue of the ACU which, in a general sense, is a weighted average of regional currencies a la the European Currency Unit (ECU) which was created in March 1979 under the European Monetary System (EMS). The paper critically examines the rationale for the ACU proposal and offers an initial attempt at computing optimal currency composition of the ACU. The optimal basket weights computed are aimed at ensuring a regional currency basket that has minimal variance. Hence it will deliver stability in intra-regional exchange rates for alternative configurations of currency baskets in the Asian and Pacific region.

Suggested Citation

  • Victor Pontines & Ramkishen Rajan, 2008. "The Asian Currency Unit (ACU): exploring alternative currency weights," Macroeconomics and Finance in Emerging Market Economies, Taylor & Francis Journals, vol. 1(2), pages 269-278.
    • Handle: RePEc:taf:macfem:v:1:y:2008:i:2:p:269-278
    DOI: 10.1080/17520840802252829
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    References listed on IDEAS

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    1. Alice Ouyang & Ramkishen Rajan & Tom Willett, 2008. "Managing the Monetary Consequences of Reserve Accumulation in Emerging Asia," Global Economic Review, Taylor & Francis Journals, vol. 37(2), pages 171-199.
    2. Ouyang, Alice Y. & Rajan, Ramkishen S. & Willett, Thomas D., 2010. "China as a reserve sink: The evidence from offset and sterilization coefficients," Journal of International Money and Finance, Elsevier, vol. 29(5), pages 951-972, September.
    3. Moneta, Fabio & Rüffer, Rasmus, 2006. "Business cycle synchronisation in East Asia," Working Paper Series 671, European Central Bank.
    4. Shingo Watanabe & Masanobu Ogura, 2006. "How Far Apart Are Two ACUs from Each Other? : Asian Currency Unit and Asian Currency Union," Bank of Japan Working Paper Series 06-E-20, Bank of Japan.
    5. Ramkishen S. Rajan, 2006. "Monetary and Financial Cooperation in Asia : Emerging Trends and Prospects," Finance Working Papers 22125, East Asian Bureau of Economic Research.
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    Cited by:

    1. Pontines, Victor, 2015. "How useful is an Asian Currency Unit (ACU) index for surveillance in East Asia?," Economic Systems, Elsevier, vol. 39(2), pages 269-287.
    2. Pontines, Victor & You, Kefei, 2015. "Asian Currency Unit (ACU), deviation indicators and exchange rate coordination in East Asia: A panel-based convergence approach," Japan and the World Economy, Elsevier, vol. 36(C), pages 42-55.

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