Premium
IS EAST ASIA FIT FOR AN OPTIMUM CURRENCY AREA? AN ASSESSMENT OF THE ECONOMIC FEASIBILITY OF A HIGHER DEGREE OF MONETARY COOPERATION IN EAST ASIA
Author(s) -
AHN Changmo,
KIM HongBum,
CHANG Dongkoo
Publication year - 2006
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.1746-1049.2006.00018.x
Subject(s) - east asia , purchasing power parity , currency , vector autoregression , purchasing power , economics , geography , china , exchange rate , monetary economics , macroeconomics , archaeology
This paper attempts to make a contribution to the recent search for a suitable assessment of the economic feasibility of a higher degree of monetary cooperation in East Asia. By using a structural vector autoregression approach as well as a generalized purchasing power parity approach, we find that a larger group of appropriately selected East Asian economies does satisfy the macroeconomic conditions for forming an Optimum Currency Area (OCA). The East Asian group consists of four ASEAN countries (Indonesia, Malaysia, Singapore, and Thailand) and four Northeast Asian economies (Hong Kong SAR, Japan, Republic of Korea, and Taiwan). This finding presents a striking contrast to the existing research results whose policy recommendation has generally been that countries in East Asia should start with a smaller subgroup currency area. It is time that many East Asian economies as a region made a serious effort to pursue a higher degree of monetary cooperation among themselves for forming an OCA.