Reconsidering the AMU ― What is the optimal basket currency for Asia? ―

AMU (Asian Monetary Unit) is a database constructed by Ogawa and Shimizu (2005) and made available on the RIETI website. The AMU basket weights are based on intraregional trade shares and GDP. However, 20 years have passed since its introduction, and the economies of Asian countries, and particularly China's, have developed significantly. Consequently, it has become necessary to review the weights of the AMU basket. The purpose of this paper is to examine which combinations of current Asian currencies form an optimal currency area by using the G-PPP Model, and to explore other possibilities to construct a new basket weight for the AMU. Based on prior research, we confirmed that incorporating factors such as each country's financial openness, exchange rate policy, the share of invoice currencies in intra-regional trade, the share of intra-regional FDI, and the degree of production networks and value chains within the region yielded more balanced weights for the basket. This approach better reflects the current economic conditions in the region.