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Can South Asia Adopt a Common Currency?

Author Info

  • 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://128.118.178.162/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
Date of revision:
Handle: RePEc:wpa:wuwpif:0508001
Note: Type of Document - pdf; pages: 44
Contact details of provider: Web page: http://128.118.178.162

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. Rose, Andrew K, 2003. "A Meta-Analysis of the Effect of Common Currencies on International Trade," CEPR Discussion Papers 4341, C.E.P.R. Discussion Papers.
  2. Eichengreen, Barry, 1993. "European Monetary Unification," Journal of Economic Literature, American Economic Association, vol. 31(3), pages 1321-57, September.
  3. 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.
  4. Reuven Glick & Andrew K. Rose, 2001. "Does a Currency Union Affect Trade? The Time Series Evidence," NBER Working Papers 8396, National Bureau of Economic Research, Inc.
  5. Jeffrey A. Frankel & Andrew K. Rose, 1996. "The Endogeneity of the Optimum Currency Area Criteria," NBER Working Papers 5700, National Bureau of Economic Research, Inc.
  6. Tamim Bayoumi, 1992. "The Effect of the ERM on Participating Economies," IMF Staff Papers, Palgrave Macmillan, vol. 39(2), pages 330-356, June.
  7. Valerie Cerra & Sandra A. Rivera & Sweta C. Saxena, 2005. "Crouching Tiger, Hidden Dragon: What Are the Consequences of China’s WTO Entry for India’s Trade?," International Trade 0508005, EconWPA.
  8. 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 655-73, September.
  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. 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.
  11. 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.
  12. Andrew K. Rose & Charles Engel, 2000. "Currency Unions and International Integration," NBER Working Papers 7872, National Bureau of Economic Research, Inc.
  13. Paolo Mauro & Tamim Bayoumi, 1999. "The Suitability of AsEAN for a Regional Currency Arrangement," IMF Working Papers 99/162, International Monetary Fund.
  14. Catherine A. Pattillo & Paul R. Masson, 2001. "Monetary Union in West Africa (ECOWAS)," IMF Occasional Papers 204, International Monetary Fund.
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Cited by:

  1. Devanthran, Haritharan, 2009. "Interdependence of SAARC-7 countries: an empirical study of business cycles," MPRA Paper 32798, University Library of Munich, Germany.
  2. 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.
  3. Sweta C. Saxena, 2005. "Are Optimal Currency Areas Optimal for All? A Reassessment of the Case for Asian Monetary Union," International Finance 0508003, EconWPA.
  4. Chuku, Chuku, 2012. "The proposed eco: should West Africa proceed with a common currency?," MPRA Paper 43739, University Library of Munich, Germany.
  5. 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.

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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