East Asian Currency Area: A Fuzzy Clustering Analysis of Homogeneity

This paper attempts to examine the degree of homogeneity and the plausibility of a currency union in East Asia from the perspective of multiple OCA criteria, using the technique of fuzzy clustering analysis. The question of homogeneity is obviously of importance to the smooth formation and operation of the prospective currency union. We find that East Asia has not been sufficiently homogeneous and can be divided into about four groups with significant degree of fuzziness. We find no notable trend of convergence from the data. In fact, East Asian has appeared to be more diverged since the onset of the regional financial crisis. Thus, we suspect the possibility of forming a currency union in East Asia in the near future.Fuzzy Clustering Analysis; East Asia; Currency Area

The determinants of an econometric demand model for beverages

Purpose: The study attempts to explore the determinants of demand for alcoholic and other beverages to see how a rise in prices of alcohol and other beverages and in household expenditure would influence demand. From the results, we discuss the effectiveness of a prospective excise tax increase on demand for alcoholic and other beverages. Design/Methodology/Approach: We use the Almost Ideal Demand System to analyze the demand for alcoholic and other beverages. A two-stage estimation approach is employed to estimate the model with data from Vietnam Households Living Standard survey in 2016. In the first stage, we model the choice of consuming or not consuming by a probit regression model. In the second stage, we estimate the demand system by seemingly unrelated regression (SUR). Findings: We find that demand for beer, other alcoholic beverages, and non-alcoholic packed drinks is elastic to own-price. However, as demand for beer and non-alcoholic packed drinks is also elastic to income, consumption would rise as income grows. Practical implications: Our findings have significant implications for policymakers and beverage producers. The findings suggest that an increase in excise tax would be an effective solution to control demand for alcoholic beverages. Beverage producers could also use the results to design pricing strategies and forecast consumer behaviors. Originality/Value: We contribute new findings to the literature of beverage demand analyses. Our findings differ from those in previous studies in the context of both developed and developing countries, which show that demand for alcoholic beverages is inelastic to own-prices. The findings have important implications for policymakers and beverage producers.peer-reviewe

Determinants of Business Cycle Synchronization in East Asia: An Extreme Bound Analysis

We investigate the determinants of business cycle synchronization in East Asia by testing the robustness of the potential candidates, using the technique of Extreme Bound Analysis in an OLS regression framework with Newey-West correction for heteroskedasticity and autocorrelation. We find that trade openness and intra-industry trade are major channels of business cycle synchronization. Although the similarity of monetary policies is statistically correlated with degree synchronization, we are unsure whether the former causes the latter or vise versa. The findings are probably good news to the proponents of the prospective currency union. If the trend of increasing openness and bilateral intra-industry trade continues in East Asia, it is expected that the costs of forming a currency union would diminish as business cycles become more synchronized.Business Cycle Synchronization; East Asia; Extreme Bound Analysis; Currency Union