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How Much Intraregional Exchange Rate Variability Could A Currency Union Remove? The Case of ASEAN+3

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  • Duo QIN
  • Tao TAN

Abstract

A multilateral currency union removes intraregional exchange rates but not the union rate. The pre-union intraregional exchange rate variability is thus latent; a two-step procedure is developed to measure this. The measured variables are used to model inflation and intraregional trade growth of individual union members. Counterfactual simulations of the union impact are carried out using the resulting models. Application to ASEAN+3 shows that the intraregional variability mainly consists of short-run exchange rate shocks, that the variability significantly affects inflation and intraregional trade of major ASEAN+3 members, and that a union would reduce inflation and promote trade regionwide.
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  • Duo QIN & Tao TAN, 2008. "How Much Intraregional Exchange Rate Variability Could A Currency Union Remove? The Case of ASEAN+3," EcoMod2008 23800111, EcoMod.
    • Handle: RePEc:ekd:000238:23800111
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    Cited by:

    1. Ho, Lok Sang, 2018. "In search of a unit of stable global purchasing power," International Review of Economics & Finance, Elsevier, vol. 56(C), pages 99-108.
    2. Moerman, Gerard A. & van Dijk, Mathijs A., 2010. "Inflation risk and international asset returns," Journal of Banking & Finance, Elsevier, vol. 34(4), pages 840-855, April.
    3. Jamshaid ur Rehman & Tasneem Zafar & Shabbir Ahmad & Aftab Anwar, 2022. "In Search of Common Currency Anchor for ASEAN+3+3 Countries," Journal of Policy Research (JPR), Research Foundation for Humanity (RFH), vol. 8(3), pages 237-264, September.

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    More about this item

    JEL classification:

    • F02 - International Economics - - General - - - International Economic Order and Integration
    • F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General
    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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