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iDEA: Drexel E-repository and Archives > Drexel Academic Community > Bennett S. LeBow College of Business > Department of Economics & International Business > Faculty Research and Publications (Economics & International Business) > A currency union or an exchange rate union: evidence from Northeast Asia

Please use this identifier to cite or link to this item: http://hdl.handle.net/1860/1837

Title: A currency union or an exchange rate union: evidence from Northeast Asia
Authors: Jeon, Bang Nam
Zhang, Hongfang
Keywords: Currency union;Exchange rate union;Optimum currency areas;Northeast Asia
Issue Date: 2007
Publisher: Center for Intenational Economics Sejong Institution
Citation: Journal of Economic Integration, 22(2): pp. 256-287.
Abstract: This paper examines whether or not Northeast Asia economies, namely, China, Japan, Korea, and Taiwan, can form a currency union, where a single currency and a uniform monetary policy are adopted, or an exchange rate union where all the currencies are pegged to an internal or external currency or an optimum currency basket. The analysis of correlations of supply shocks, exchange rate shocks, monetary shocks, and demand shocks, which are estimated applying the structural VAR model with identification restrictions imposed, to the data for the period from 1970 through 2004, shows that shocks of these economies are not symmetric, in general, implying that the Northeast Asian economies are not ready yet to form a common currency union. However, it is found that the Northeast Asian countries can form an exchange rate union with a major currency basket, which consists of the U.S. dollar, the euro and the Japanese yen, as an anchor currency. The paper also examines the option of pegging to a basket of regional currencies, similar to the Asian Currency Unit (ACU), and discusses policy implications.
URI: http://hdl.handle.net/1860/1837
Appears in Collections:Faculty Research and Publications (Economics & International Business)

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