EconPapers    
Economics at your fingertips  
 

Real Output Co‐movements in East Asia: Any Evidence for a Monetary Union?

Kiyotaka Sato and Zhaoyong Zhang

The World Economy, 2006, vol. 29, issue 12, 1671-1689

Abstract: The East Asian region has experienced astonishing economic growth and integration over the past few decades. It is generally believed that a high degree of integration in the region would greatly shape the economic structure of each individual economy and has direct implications for the effectiveness of domestic stabilisation policy and policy coordination. This paper empirically examines the feasibility of forming a monetary union in East Asia by assessing the real output co‐movements among these economies. As suggested by the optimum currency area (OCA) theory that losing monetary independence would be the major cost for adopting a common currency, it would be less costly for the economies to form a monetary union if the business cycles are synchronised across countries. The cointegration test and the Vahid and Engle (1993) test for common business cycles are conducted to examine their long‐run relationship and short‐run interactions in real outputs, respectively. Our study found that some pair countries in the region share both the long‐run and short‐run synchronous movements of the real outputs. In particular, the short‐run common business cycles are found in some pairs of ASEAN economies consisting of Singapore, Thailand and Indonesia, and in the Northeast Asian region consisting of Hong Kong, Korea and Mainland China, as well as between Japan and Taiwan. These findings have important implications for the economies in terms of adjustment costs when considering the adoption of a monetary union.

Date: 2006
References: View complete reference list from CitEc
Citations: View citations in EconPapers (57)

Downloads: (external link)
https://doi.org/10.1111/j.1467-9701.2006.00863.x

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:worlde:v:29:y:2006:i:12:p:1671-1689

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0378-5920

Access Statistics for this article

The World Economy is currently edited by David Greenaway

More articles in The World Economy from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery (contentdelivery@wiley.com).

 
Page updated 2024-12-26
Handle: RePEc:bla:worlde:v:29:y:2006:i:12:p:1671-1689