ASEAN Monetary Union: Is ASEAN an Optimum Currency Area?

Hujah ekonomi yang menyokong pembentukan kesatuan kewangan menekankan bahawa kesatuan kewangan mampu memberikan kestabilan kadar pertukaran, kadar bunga dan inflasi yang rendah serta merangsang perdagangan sesama negara anggota. Economic arguments in support of monetary union argues that a monetary union is capable of providing stable exchange rate, low interest and inflation rate as well promoting trade within the monetary union zone

Some empirical evidences on ASEAN 5 fiscal policy regime and monetary and fiscal policy interactions

The interest of common currency among Asian countries have spurred many events happening for the past few years, notably the declaration of Asian Currency Unit in 2006 by Asia Development Bank (ADB). Hence, research papers examining on the integration of monetary policies are abundance. However, paper on examining fiscal policy regime and interaction between monetary and fiscal policy on ASEAN countries, is lacking. The success of monetary union relies on the price stability of member nations. However, joining a monetary union means the lost of monetary policy sovereignty. Therefore, fiscal policy turns to be the next important tool to maintain price stability. This is reflected from the EMU countries after year 1999, where national monetary policies are completely centralized to the European Central Bank (ECB). The European System of Central Banks (ESCB) combines unity of decisions with participation of national central banks in the decision making process and implementation. Nevertheless, national fiscal policies of the member countries are still in the hands of the national governments. This paper intents to examine the type of fiscal policy regime practiced by ASEAN 5 countries. Using macro-economic data for Indonesia, Malaysia, Philippines, Singapore and Thailand, the interrelationship of government surplus/deficits and liabilities is analyzed using Correlation test, Vector Auto-regression (VAR) and Impulse response (IR) function to determine whether a Ricardian or Non-Ricardian fiscal policy has been implemented. Also, comparison of monetary and fiscal policy interactions between some EMU countries and ASEAN 5 are made. The results indicate interactions among inter EMU countries and inter ASEAN countries are generally comparable

Are Countries of Association of South East Asia Nations (ASEAN) Candidates of Optimum Currency Area for Monetary Union? A Structural VAR Approach

Intra-trade among ASEAN countries have remained around 20% over the period 1993 until 2001 (ASEAN Secretariat). With this significant amount of trade being conducted between members of ASEAN countries, businesses were faced with exchange rate exposure due to the volatility of the exchange rate within the regions as was experienced during the Asian Financial Crisis of 1997-98. Members of the European Union overcome this exchange rate exposure by agreeing to form a monetary union and adopting Euro as their common currency in 1999. This paper examines the feasibility of a Optimum Currency Area (OCA) for ASEAN 9 to adopt a common currency, especially after the 1997-98 Asian Financial Crisis. Using macro-economic data for 9 ASEAN countries over the 15 years period (1990–2004), the paper addresses whether an OCA would be well suited for these countries, following the trails of Euro formation

Are Countries of Association of South East Asia Nations (ASEAN) Candidates of Optimum Currency Area for Monetary Union? A Structural VAR Approach

Intra-trade among ASEAN countries have remained around 20% over the period 1993 until 2001 (ASEAN Secretariat). With this significant amount of trade being conducted between members of ASEAN countries, businesses were faced with exchange rate exposure due to the volatility of the exchange rate within the regions as was experienced during the Asian Financial Crisis of 1997-98. Members of the European Union overcome this exchange rate exposure by agreeing to form a monetary union and adopting Euro as their common currency in 1999. This paper examines the feasibility of a Optimum Currency Area (OCA) for ASEAN 9 to adopt a common currency, especially after the 1997-98 Asian Financial Crisis. Using macro-economic data for 9 ASEAN countries over the 15 years period (1990–2004), the paper addresses whether an OCA would be well suited for these countries, following the trails of Euro formation.monetary union, optimum currency area, SVAR, Financial Economics, E52, F31, F36,