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Is Economic Development Promoting Monetary Integration in East Asia?

Kentaro Kawasaki and Zhi-Qian Wang
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Zhi-Qian Wang: Faculty of Commerce and Management, Hitotsubashi University, 2-1 Naka, Kunitachi, Tokyo 186-8601, Japan

IJFS, 2015, vol. 3, issue 4, 1-31

Abstract: This paper tries to investigate whether there exist international integrated markets among East Asian economies, by employing the Generalized Purchasing Power Parity (G-PPP) model, then, it would help to suggest whether the East Asian region is the Optimum Currency Area (OCA) or not. The empirical results in this paper suggest that holding the G-PPP among nine Asian countries (China, Indonesia, Japan, Korea, Malaysia, the Philippines, Singapore, Thailand and Vietnam) becomes more applicable in 2000–2013 than of that in 1984–1997. In the period of “globalization,” which is characterized by expansion of world trade, increase of international capital flows, and development of information and communications technologies, Asian economic development has been promoting not only economic integrations but also constructing the stable linkages of real exchange rates. Therefore, it would help to adopt regional coordination for monetary policies to assure the feasibility of a possible monetary union.

Keywords: OCA; exchange rate; M-TAR; co-integration with thresholds adjustment (search for similar items in EconPapers)
JEL-codes: F2 F3 F41 F42 G1 G2 G3 (search for similar items in EconPapers)
Date: 2015
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