To Be or Not to Be: An Optimum Currency Area for South Asia?
41 Pages Posted: 17 Aug 2013
Date Written: July 31, 2013
Abstract
This paper empirically investigates whether South Asian countries constitute an optimum currency area (OCA) by applying a structural vector auto-regression (SVAR) model to trace global, regional, and domestic shocks. Variance decomposition shows that domestic shocks dominate regional and global shocks, which contrasts with our findings for the European Union countries, used as a basis for comparison. We conclude that at the present time the South Asian region as a whole does not meet the prerequisite conditions of an OCA. The loss of an autonomous monetary instrument can outweigh the benefits of a common currency.
Keywords: South Asia, common currency, SVAR, variance decompositions
JEL Classification: F33, F36
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Migration, Co-Ordination Failures and EU Enlargement
By Tito Boeri and Herbert Brücker
-
Scale, Diversity, and Determinants of Labour Migration in Europe
-
Scale, Diversity and Determinants of Labour Migration in Europe
-
Migration, the Quality of the Labour Force and Economic Inequality
-
Migration, the Quality of the Labour Force and Economic Inequality
-
Migration, the Quality of the Labour Force and Economic Inequality
-
Lessons from Migration after EU Enlargement
By Martin Kahanec, Anzelika Zaiceva, ...