How Close is Asia to an Optimal Currency Area in Terms of Business Cycle Co-Movement?

Alicia Garcia-Herrero
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Alicia Garcia-Herrero: Chief Economist, Emerging Markets at BBVA and Visiting Professor at CEBIS (E-mail: alicia.garcia-herrero@bbva.com)
Authors registered in the RePEc Author Service: Alicia Garcia Herrero

No 14-E-12, IMES Discussion Paper Series from Institute for Monetary and Economic Studies, Bank of Japan

Abstract: The paper assesses how close Asian countries are to an Optimal Currency Area in terms of business cycle synchronization, with a focus on supply shock asymmetry. Based on a Structural VAR model, the importance of symmetric and asymmetric supply shocks is teasted for all ASEAN+3 countries. In addition, a spatial approach is used to analyze its impact on the whole Asian region and on pairs of Asian countries. The conclusion is that there is evidence of increasing symmetry of supply shocks although the situation differs largely on a country by country basis. Such finding would support a multi-speed process of monetary integration in the region.

Keywords: Business cycle synchronization; Optimal Currency Area; Asian economic integration; Structural Vector Auto Regression; ASEAN+3 (search for similar items in EconPapers)
JEL-codes: E32 F40 F44 (search for similar items in EconPapers)
Date: 2014-12
New Economics Papers: this item is included in nep-mac and nep-sea
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Persistent link: https://EconPapers.repec.org/RePEc:ime:imedps:14-e-12

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