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SHOULD THE SOUTHEAST ASIAN COUNTRIES FORM A CURRENCY UNION?
Author(s) -
NG Thiam Hee
Publication year - 2002
Publication title -
the developing economies
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.305
H-Index - 30
eISSN - 1746-1049
pISSN - 0012-1533
DOI - 10.1111/j.1746-1049.2002.tb01003.x
Subject(s) - currency union , economics , openness to experience , international economics , demand shock , vector autoregression , structural vector autoregression , currency , supply shock , southeast asia , international trade , monetary economics , monetary policy , psychology , social psychology , ancient history , history
This paper examines some of the factors related to the formation of a currency union in Southeast Asia. The main part of the paper presents the results of our examination of the correlation of shocks for the Southeast Asian countries using a structural vector autoregression. The shocks are identified using restrictions on the long‐run coefficient matrix as suggested by Blanchard and Quah (1989). The correlations of shocks for the EU and NAFTA countries are used for comparison. The Southeast Asian countries are shown to have more strongly correlated shocks than the EU countries. Compared with the NAFTA countries, external shocks are more closely correlated for the ASEAN countries, but the supply and demand shocks are less correlated. Indonesia, Singapore, and Malaysia, in particular, exhibit a high degree of correlation of shocks. Other criteria for monetary union, such as intra‐regional trade, openness of the economy, and similarity of monetary policy are also examined.