ENHANCING ECONOMIC INTEGRATION IN SOUTH ASIA: ISSUES AND PROSPECTS FOR CLOSER MONETARY COOPERATION

Sisira Jayasuriya and Nephil Maskay ()

The Singapore Economic Review (SER), 2010, vol. 55, issue 01, 185-206

Abstract: Though SAARC has the stated goal of an economic union and a common currency, after a quarter of a century, these remain distant goals as political tensions between India and Pakistan have hindered any real progress on a regional scale. Barriers to trade and factor mobility are high in the region as a whole, though considerable liberalisation has been achieved through various bilateral agreements involving India and some of its neighbours. The conventional economic conditions for a common currency are also currently absent as patterns of shocks are non-synchronised, trade links are weak and factor mobility much constrained. Deeper intraregional economic integration requires much more comprehensive trade and investment liberalisation among member nations. While the political conditions for a single currency are unlikely to emerge in the foreseeable future, steps towards closer monetary cooperation through a South Asian Monetary System — building on the existing SAARCFINANCE network — may provide an institutional framework for enhancing regional integration. However, such cooperation will have to be conceived as a component of a sustainable transitional strategy which commits to a serious programme of deeper trade liberalisation to facilitate greater integration with the rest of the world, and most importantly, with East Asia.

Keywords: South Asia; monetary integration; economic integration; monetary system; F33 (search for similar items in EconPapers)
Date: 2010
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DOI: 10.1142/S0217590810003663

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