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Can South Asia Adopt a Common Currency?

Author Info

Listed author(s):
  • Sweta C. Saxena

    (University of Pittsburgh)

Abstract

The paper examines if the seven South Asian countries satisfy the criteria to form an optimal currency area. The empirical part of the paper reveals some positive attributes (such as the existence of positive shocks for major economies like India, Pakistan and Sri Lanka). The paper provides geo-political reasoning for more economic cooperation among the countries, suggesting areas where cooperation could be mutually beneficial to the economies. This paper argues that the benefits of a common currency would accrue from the peace that economic integration would bring between India and Pakistan. The paper also compares this region with Western Europe and Southeast Asia.

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File URL: http://econwpa.repec.org/eps/if/papers/0508/0508001.pdf
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Paper provided by EconWPA in its series International Finance with number 0508001.

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Length: 44 pages
Date of creation: 07 Aug 2005
Handle: RePEc:wpa:wuwpif:0508001
Note: Type of Document - pdf; pages: 44
Contact details of provider: Web page: http://econwpa.repec.org

Keywords: South Asia; SAARC; Monetary union; economic integration; optimal currency areas;

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Find related papers by JEL classification:
  • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
  • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
  • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
  • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

References listed on IDEAS
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  1. Frankel, Jeffrey A & Rose, Andrew K, 1998. "The Endogeneity of the Optimum Currency Area Criteria," Economic Journal, Royal Economic Society, vol. 108(449), pages 1009-1025, July.
  2. Blanchard, Olivier Jean & Quah, Danny, 1989. "The Dynamic Effects of Aggregate Demand and Supply Disturbances," American Economic Review, American Economic Association, vol. 79(4), pages 655-673, September.
  3. Hassan, M. Kabir, 2001. "Is SAARC a viable economic block? evidence from gravity model," Journal of Asian Economics, Elsevier, vol. 12(2), pages 263-290.
  4. M. Dutta, 1999. "Economic Regionalization in the Asia-pacific," Books, Edward Elgar Publishing, number 1497.
  5. Andrew K. Rose, 2000. "One money, one market: the effect of common currencies on trade," Economic Policy, CEPR;CES;MSH, vol. 15(30), pages 7-46, 04.
  6. International Monetary Fund, 2005. "Crouching Tiger, Hidden Dragon; What Are the Consequences of China’s WTO Entry for India’s Trade?," IMF Working Papers 05/101, International Monetary Fund.
  7. Tamim Bayoumi, 1992. "The Effect of the ERM on Participating Economies," IMF Staff Papers, Palgrave Macmillan, vol. 39(2), pages 330-356, June.
  8. Andrew K. Rose & T. D. Stanley, 2005. "A Meta-Analysis of the Effect of Common Currencies on International Trade ," Journal of Economic Surveys, Wiley Blackwell, vol. 19(3), pages 347-365, 07.
  9. Jeffrey A. Frankel & Andrew K. Rose, 2000. "Estimating the Effect of Currency Unions on Trade and Output," NBER Working Papers 7857, National Bureau of Economic Research, Inc.
  10. Tamim Bayoumi & Paolo Mauro, 2001. "The Suitability of ASEAN for a Regional Currency Arrangement," The World Economy, Wiley Blackwell, vol. 24(7), pages 933-954, 07.
  11. Glick, Reuven & Rose, Andrew K., 2002. "Does a currency union affect trade? The time-series evidence," European Economic Review, Elsevier, vol. 46(6), pages 1125-1151, June.
  12. Rose, Andrew K & Engel, Charles, 2002. "Currency Unions and International Integration," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 34(4), pages 1067-1089, November.
  13. Catherine A Pattillo & Paul R Masson, 2001. "Monetary Union in West Africa (ECOWAS)," IMF Occasional Papers 204, International Monetary Fund.
  14. Eichengreen, Barry, 1993. "European Monetary Unification," Journal of Economic Literature, American Economic Association, vol. 31(3), pages 1321-1357, September.
  15. Frankel, Jeffrey A. & Rose, Andrew K., 1997. "Is EMU more justifiable ex post than ex ante?," European Economic Review, Elsevier, vol. 41(3-5), pages 753-760, April.
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Cited by:

  1. Agénor, Pierre-Richard & Aizenman, Joshua, 2011. "Capital market imperfections and the theory of optimum currency areas," Journal of International Money and Finance, Elsevier, vol. 30(8), pages 1659-1675.
  2. Sweta C. Saxena, 2005. "Are Optimal Currency Areas Optimal for All? A Reassessment of the Case for Asian Monetary Union," International Finance 0508003, EconWPA.
  3. Regmi, Krishna & Nikolsko-Rzhevskyy, Alex & Thornton, Robert, 2015. "To be or not to be: An optimum currency area for South Asia?," Journal of Policy Modeling, Elsevier, vol. 37(6), pages 930-944.
  4. Md. Abdur Rahman Forhad, 2014. "How many currencies in Saarc countries? a multivariate structural var approach," Journal of Developing Areas, Tennessee State University, College of Business, vol. 48(4), pages 265-286, October-D.
  5. Chuku, Chuku, 2012. "The proposed eco: should West Africa proceed with a common currency?," MPRA Paper 43739, University Library of Munich, Germany.
  6. Devanthran, Haritharan, 2009. "Interdependence of SAARC-7 countries: an empirical study of business cycles," MPRA Paper 32798, University Library of Munich, Germany.

This item is featured on the following reading lists or Wikipedia pages:

  1. Unión monetaria in Wikipedia Spanish ne '')
  2. Unión monetaria in Wikipedia Galician ne '')
  3. Валютный союз in Wikipedia Russian ne '')

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