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Enhancing Economic Integration In South Asia: Issues And Prospects For Closer Monetary Cooperation

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    (La Trobe University, Melbourne, Australia)


    (Nepal Rastra Bank, Nepal)

Though SAARC has the stated goal of an economic union and a common currency, after a quarter of a century, these remain distant goals as political tensions between India and Pakistan have hindered any real progress on a regional scale. Barriers to trade and factor mobility are high in the region as a whole, though considerable liberalisation has been achieved through various bilateral agreements involving India and some of its neighbours. The conventional economic conditions for a common currency are also currently absent as patterns of shocks are non-synchronised, trade links are weak and factor mobility much constrained. Deeper intraregional economic integration requires much more comprehensive trade and investment liberalisation among member nations. While the political conditions for a single currency are unlikely to emerge in the foreseeable future, steps towards closer monetary cooperation through a South Asian Monetary System — building on the existing SAARCFINANCE network — may provide an institutional framework for enhancing regional integration. However, such cooperation will have to be conceived as a component of a sustainable transitional strategy which commits to a serious programme of deeper trade liberalisation to facilitate greater integration with the rest of the world, and most importantly, with East Asia.

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Article provided by World Scientific Publishing Co. Pte. Ltd. in its journal The Singapore Economic Review.

Volume (Year): 55 (2010)
Issue (Month): 01 ()
Pages: 185-206

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Handle: RePEc:wsi:serxxx:v:55:y:2010:i:01:p:185-206
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