Prospects for enhanced exchange rate cooperation in East Asia: some preliminary findings from generalized PPP theoryPeter Wilson and Keen Meng Choy () Applied Economics, 2007, vol. 39, issue 8, pages 981-995 Abstract: The Asian financial crisis increased economic disparities in the East Asian (EA) region, thus making monetary integration more difficult, but rekindled political interest in Asian monetary and exchange rate cooperation. This article applies the theory of Generalized Purchasing Power Parity (G-PPP), which looks at the behaviour of long-run real exchange rates, to assess the potential for an optimum currency area (OCA) among a subset of EA countries based on five of the more advanced members of the Association of Southeast Asian Nations (ASEAN5). Our findings suggest little support for an OCA for ASEAN5 as a bloc prior to the Asian financial crisis and mixed results in the post-crisis period. In particular, asymmetries in the way countries adjust to shocks and low or insignificant speeds of adjustment were found. Thus, although the application of single OCA criteria is notoriously demanding and our tests apply to only one of the many criteria for the successful formation of an OCA, we cannot find persuasive evidence that ASEAN5 as a group constitute a potential currency area with either the USA or Japan, even when the 'noisy' period of the Asian financial crisis is omitted. Downloads: (external link) Related works: Ordering information: This journal article can be ordered from Access Statistics for this article Applied Economics is edited by Mark Taylor More articles in Applied Economics from Taylor and Francis Journals |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
Econpapers is hosted by the
Swedish Business School at Örebro University.