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A Currency Union in East Asia

Author

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  • Jong-Wha Lee
  • Yung Chul Park
  • Kwanho Shin

Abstract

This paper investigates prospects of a currency union in East Asia, focusing on trade and financial integration occurring in the region. We find, based on a dynamic factor model, regional common shocks have been quantitatively important for output variations in the Asian economies. We expect that continuing trade integration in the region will lead to further synchronization of business cycles, thereby encouraging East Asian countries to create a currency union in the region. In contrast to trade, however, financial liberalization in East Asia tends to lead to more global integration, rather than regional integration, of the financial systems, and thereby is not likely to develop favorable conditions for forming a regional currency union among East Asian countries.

Suggested Citation

  • Jong-Wha Lee & Yung Chul Park & Kwanho Shin, 2003. "A Currency Union in East Asia," ISER Discussion Paper 0571, Institute of Social and Economic Research, Osaka University.
    • Handle: RePEc:dpr:wpaper:0571
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    Cited by:

    1. Huh, Hyeon-seung & Kim, David & Kim, Won Joong & Park, Cyn-Young, 2015. "A factor-augmented VAR analysis of business cycle synchronization in east Asia and implications for a regional currency union," International Review of Economics & Finance, Elsevier, vol. 39(C), pages 449-468.
    2. Chan, Tze-Haw & Lau, Evan, 2004. "Business cycles and the synchronization process: a bounds testing approach," MPRA Paper 2030, University Library of Munich, Germany, revised 2005.
    3. Creti, Anna & Ftiti, Zied & Guesmi, Khaled, 2014. "Oil price and financial markets: Multivariate dynamic frequency analysis," Energy Policy, Elsevier, vol. 73(C), pages 245-258.
    4. Willem Thorbecke & Mario Lamberte & Ginalyn Komoto, 2010. "Promoting Learning and Industrial Upgrading in ASEAN Countries," Macroeconomics Working Papers 23287, East Asian Bureau of Economic Research.
    5. Yin-Wong Cheung & Jude Yuen, 2004. "An Output Perspective on a Northeast Asia Currency Union," CESifo Working Paper Series 1250, CESifo.
    6. Sánchez, Marcelo, 2005. "Is time ripe for a currency union in emerging East Asia? The role of monetary stabilisation," Working Paper Series 567, European Central Bank.
    7. Eric Girardin, 2004. "Regime-Dependent Synchronization of Growth Cycles between Japan and East Asia," Asian Economic Papers, MIT Press, vol. 3(3), pages 147-176.
    8. Rana, Pradumna B., 2007. "Trade Intensity and Business Cycle Synchronization: The Case of East Asia," Working Papers on Regional Economic Integration 10, Asian Development Bank.
    9. Kwanho Shin & Yunjong Wang, 2003. "Trade Integration and Business Cycle Synchronization in East Asia," Asian Economic Papers, MIT Press, vol. 2(3), pages 1-20.
    10. Kim, Soyoung & Lee, Jong-Wha & Shin, Kwanho, 2006. "Regional and Global Financial Integration in East Asia," MPRA Paper 695, University Library of Munich, Germany.
    11. Chan, Tze-Haw & Khong, Wye Leong Roy, 2007. "Business Cycle Correlation and Output Linkages among the Asia Pacific Economies," MPRA Paper 11305, University Library of Munich, Germany, revised 24 Oct 2008.
    12. Allegret, Jean-Pierre & Essaadi, Essahbi, 2011. "Business cycles synchronization in East Asian economy: Evidences from time-varying coherence study," Economic Modelling, Elsevier, vol. 28(1), pages 351-365.
    13. Kwanho Shin & Yunjong Wang, 2003. "Monetary Integration Ahead of Trade Integration in East Asia?," ISER Discussion Paper 0572, Institute of Social and Economic Research, Osaka University.
    14. Bouchouicha, Ranoua & Ftiti, Zied, 2012. "Real estate markets and the macroeconomy: A dynamic coherence framework," Economic Modelling, Elsevier, vol. 29(5), pages 1820-1829.
    15. Yin-Wong Cheung & Jude Yuen, 2004. "The Suitability of a Greater China Currency Union," CESifo Working Paper Series 1192, CESifo.
    16. Kwanho Shin & Yunjong Wang, 2005. "The Impact of Trade Integration on Business Cycle Co-Movements in Europe," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 141(1), pages 104-123, April.
    17. Shin, Kwanho & Wang, Yunjong, 2004. "Trade integration and business cycle co-movements: the case of Korea with other Asian countries," Japan and the World Economy, Elsevier, vol. 16(2), pages 213-230, April.
    18. Huh, Hyeon-seung & Kim, David & Kim, Won Joong & Park, Cyn-Young, 2013. "A Factor-Augmented Vector Autoregression Analysis of Business Cycle Synchronization in East Asia and Implications for a Regional Currency Union," ADB Economics Working Paper Series 385, Asian Development Bank.
    19. Anjan Panday, 2014. "Monetary Integration between India and Nepal," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 15(2), pages 199-224, September.
    20. Watanabe, Shingo & Ogura, Masanobu, 2010. "How far apart are the two ACUs from each other? Asian currency unit and Asian currency union," Emerging Markets Review, Elsevier, vol. 11(2), pages 152-172, June.

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