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Are the "ASEAN Plus Three" Countries Coming Closer to an OCA?


  • KAWASAKI Kentaro


After the global financial crisis, it has become more recognized that the policy dialogues among both emerging and advanced economies on the exchange rate is necessary to prevent competitive devaluation. In this context, East Asian countries should also choose an adequate exchange rate system. However, there still exists a variety of exchange rate regimes in this area, which might suggest a possibility of coordination failure. To avoid this, the establishment of stable exchange rate linkages and the enhancement of monetary policy credibility in East Asia are needed. These discussions on common regional exchange rate policy are often related to the "Optimum Currency Area (OCA) theory" because stabilized exchange rates in the global economies are only assured by a "one size fits all" monetary policy in the end. Hence, the main purpose of this paper is to investigate whether East Asian countries—ASEAN5, China, Korea, and Japan—have developed into matching an OCA in recent years or not. While developing the earlier generalized purchasing power parity (G-PPP) model into an up-to-date non-linear econometric model and considering the adoption of the Asian monetary unit (AMU) into this area, this paper could have positive empirical results which suggest for forming a common currency in East Asia.

Suggested Citation

  • KAWASAKI Kentaro, 2012. "Are the "ASEAN Plus Three" Countries Coming Closer to an OCA?," Discussion papers 12032, Research Institute of Economy, Trade and Industry (RIETI).
  • Handle: RePEc:eti:dpaper:12032

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    References listed on IDEAS

    1. Delgado, Miguel A. & Farinas, Jose C. & Ruano, Sonia, 2002. "Firm productivity and export markets: a non-parametric approach," Journal of International Economics, Elsevier, vol. 57(2), pages 397-422, August.
    2. Ryuhei Wakasugi & Ayumu Tanaka, 2012. "Productivity Heterogeneity and Internationalization: Evidence from Japanese Firms," Millennial Asia, , vol. 3(1), pages 45-70, January.
    3. Tomiura, Eiichi, 2007. "Foreign outsourcing, exporting, and FDI: A productivity comparison at the firm level," Journal of International Economics, Elsevier, vol. 72(1), pages 113-127, May.
    4. Pol Antràs, 2003. "Firms, Contracts, and Trade Structure," The Quarterly Journal of Economics, Oxford University Press, vol. 118(4), pages 1375-1418.
    5. WAKASUGI Ryuhei & TODO Yasuyuki & SATO Hitoshi & NISHIOKA Shuichiro & MATSUURA Toshiyuki & ITO Banri & TANAKA Ayumu, 2008. "The Internationalization of Japanese Firms: New Findings Based on Firm-Level Data," Discussion papers 08036, Research Institute of Economy, Trade and Industry (RIETI).
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    Cited by:

    1. Kentaro Kawasaki & Zhi-Qian Wang, 2015. "Is Economic Development Promoting Monetary Integration in East Asia?," International Journal of Financial Studies, MDPI, Open Access Journal, vol. 3(4), pages 1-31, October.
    2. KAWASAKI Kentaro, 2013. "How Does the Regional Monetary Unit Work as a Surveillance Tool in East Asia?," Discussion papers 13026, Research Institute of Economy, Trade and Industry (RIETI).

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