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A Political Economic Critique on the Theory of Optimum Currency Areas, and the Implications for East Asia
Author(s) -
Chey Hyoungkyu
Publication year - 2009
Publication title -
world economy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.594
H-Index - 68
eISSN - 1467-9701
pISSN - 0378-5920
DOI - 10.1111/j.1467-9701.2009.01200.x
Subject(s) - economics , optimum currency area , currency , east asia , politics , explanatory power , currency union , point (geometry) , monetary hegemony , perspective (graphical) , international economics , macroeconomics , economic system , monetary policy , political science , china , philosophy , geometry , mathematics , epistemology , artificial intelligence , law , computer science
In recent years, dynamic debate has arisen as to the desirability and feasibility of creating a monetary union in East Asia. While the debate has relied heavily on the theory of optimum currency areas, this theory has weaknesses in explaining the actual formation of monetary unions. At this point, political economy analysis appears to demonstrate stronger explanatory power. This paper provides a systematic review of the main developments in the literature on optimum currency area theory and in the political economy literature on monetary union. In addition, it addresses the feasibility of an East Asian monetary union, by applying the findings in these two academic strands to the region. It finds that even though formation of an East Asian monetary union may be to some extent feasible from an economic perspective, the region’s political situation does not appear favourable for the creation of one.