Is Time Ripe for a Currency Union in Emerging East Asia? The Role of Monetary Stabilisation

62 Pages Posted: 4 Jan 2006

Date Written: December 2005

Abstract

This paper assesses the prospects for monetary integration between Emerging East Asian (EEA) economies. Our empirical analysis is based on a simple analytical framework for currency unions of small open economies, with a focus on the conduct of monetary policy in the presence of different types of shocks. Our empirical analysis looks at a number of supply-side characteristics of EEA countries, distinguishing between aggregate and tradable sector structural features. Moreover, we discuss the evidence on the cross-country variation of disturbances hitting the region. Our study indicates that, at present, EEA economies exhibit a high degree of cross-country supply diversity, while there is no compelling evidence that shocks are highly correlated across the region.

Keywords: East Asia, emerging economies, currency union, stabilisation

JEL Classification: E52, E58, F33, F40

Suggested Citation

Sanchez, Marcelo, Is Time Ripe for a Currency Union in Emerging East Asia? The Role of Monetary Stabilisation (December 2005). ECB Working Paper No. 567, Available at SSRN: https://ssrn.com/abstract=868440

Marcelo Sanchez (Contact Author)

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

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