Proposal for the Possible Establishment of an ASEAN Dollar

32 Pages Posted: 7 Feb 2004

See all articles by Aman Agarwal

Aman Agarwal

IIF Business School (IIFBS)

Jack H.W. Penm

Australian National University - School of Finance and Applied Statistics, Faculty of Economics and Commerce

Wing-Keung Wong

Asia University, Department of Finance

Abstract

The current optimal strategy for ASEAN countries is to assess whether the necessary environments exist for the establishment of a well-integrated common financial market for the ASEAN area, and consequently support for a single currency. The currency is for discussion purposes termed the ASEAN Dollar. In this paper we focus on a practical application, involving two components: 1) The six convergence criteria that we propose each ASEAN country should meet in order to become eligible for the ASEAN Dollar; and 2) Establishment of the ASEAN Economic and Currency Community (AECC).

Further, measurement of the evolution of financial market integration in the ASEAN countries will be investigated. Patterned vector time-series modelling will be utilised to set up and monitor economic and financial integration indicators. Those economic and financial integration indicators will be applied to measure the following three broad financial categories in the ASEAN countries: a) credit and bond market integration and cointegration to establish the nature of short and long-term co-movement; b) Stock market integration and cointegration to establish the nature of short and long-term co-movement; and c) Exchange rate market integration and cointegration to establish the nature of short and long-term co-movement. Subsequent evaluation of key indicators of economic and financial integration will also be undertaken.

Keywords: ASEAN Dollar, Convergence Criteria, Financial market integration

JEL Classification: G10, F30, F36

Suggested Citation

Agarwal, Aman and Penm, Jack and Wong, Wing-Keung, Proposal for the Possible Establishment of an ASEAN Dollar. Available at SSRN: https://ssrn.com/abstract=495883 or http://dx.doi.org/10.2139/ssrn.495883

Aman Agarwal

IIF Business School (IIFBS) ( email )

Ashok Vihar II
Delhi, 110052
India
+91-11-27136257 (Phone)
+91-11-27454128 (Fax)

Jack Penm (Contact Author)

Australian National University - School of Finance and Applied Statistics, Faculty of Economics and Commerce ( email )

Canberra, Australian Capital Territory 0200
Australia
+61 (02) 61250535 (Phone)
+61 (02) 61250087 (Fax)

Wing-Keung Wong

Asia University, Department of Finance ( email )

Taiwan
Taiwan

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