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An Output Perspective on a Northeast Asia Currency Union

  • Yin-wong Cheung

    (University of California, Santa Cruz)

  • Jude Yuen

    (University of California, Santa Cruz)

The prospect of creating a currency union consisting of China, Japan, and Korea is evaluated using output data. After a brief discussion on the interactions between the three countries, the study investigates whether these three countries have common synchronous business cycles, which are perceived as one of the preconditions of a currency union. Then, we assess the potential costs of giving up monetary policy autonomy to form a currency union. It is found that the three national output series tend to move together in the long run and share common business cycles. While the output loss estimates depend on assumptions used to generate shocks, they tend to be small. However, there are potential conflicts between these countries on the choice of the policy target of the common monetary authorities.

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Paper provided by Hong Kong Institute for Monetary Research in its series Working Papers with number 162005.

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Length: 28 pages
Date of creation: Sep 2005
Date of revision:
Handle: RePEc:hkm:wpaper:162005
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