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An Output Perspective on a Northeast Asia Currency Union

Yin-Wong Cheung and Jude Yuen
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Jude Yuen: University of California, Santa Cruz

No 162005, Working Papers from Hong Kong Institute for Monetary Research

Abstract: The prospect of creating a currency union consisting of China, Japan, and Korea is evaluated using output data. After a brief discussion on the interactions between the three countries, the study investigates whether these three countries have common synchronous business cycles, which are perceived as one of the preconditions of a currency union. Then, we assess the potential costs of giving up monetary policy autonomy to form a currency union. It is found that the three national output series tend to move together in the long run and share common business cycles. While the output loss estimates depend on assumptions used to generate shocks, they tend to be small. However, there are potential conflicts between these countries on the choice of the policy target of the common monetary authorities.

Keywords: Common Stochastic Trend; Business Cycles; Output Losses; Exchange Rate Regime; Asian Economies (search for similar items in EconPapers)
JEL-codes: F33 F41 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2005-09
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