The prospects of a monetary union in East Asia

Grace Lee and Sharon G. M. Koh

Economic Modelling, 2012, vol. 29, issue 2, 96-102

Abstract: This paper assesses the empirical desirability of the East Asian economies to form a monetary union. The Structural Vector Autoregression (VAR) method is employed to assess the nature of macroeconomic disturbances among the East Asian countries, as a preliminary guide in identifying potential candidates for forming an Optimum Currency Area (OCA). In comparison with European countries, East Asia has less symmetric underlying structural shocks but the speed of adjustment to shocks is much faster. The empirical results suggest that there exists a scope among some small sub-regions, comprising mainly of ASEAN countries, for potential monetary integration. The finding of an increased symmetry of shocks among countries after the Asian Financial crisis indicates that the regional policy-coordinating effort after the crisis has put the region on the right track if monetary union is a desired goal.

Keywords: Optimum currency area; Monetary union; Vector autoregression; Exchange rate; East Asia (search for similar items in EconPapers)
JEL-codes: F36 F41 F44 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (23)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:29:y:2012:i:2:p:96-102

DOI: 10.1016/j.econmod.2011.06.022

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