
A Currency Union or an Exchange Rate Union
Evidence from Northeast Asia
- Bang Nam Jeon Hongfang Zhang
- 세종대학교 경제통합연구소
- Journal of Economic Integration
- 제22권 제2호
- 등재여부 : KCI등재
- 2007.06
- 256 - 287 (32 pages)
This paper examines whether or not the Northeast Asian economies, namely, China, Japan, Korea, and Taiwan, can form a currency union, where a single currency and a uniform monetary policy are adopted, or an exchange rate union where all the currencies are pegged to an internal or external currency or an optimum currency basket. The analysis of correlations of supply shocks, exchange rate shocks, monetary shocks, and demand shocks, which are estimated applying the structural VAR model with identification restrictions imposed, to the data for the period from 1970 through 2004, shows that shocks of these economies are not symmetric, in general, implying that the Northeast Asian economies are not ready yet to form a common currency union. However, it is found that the Northeast Asian countries can form an exchange rate union with a major currency basket, which consists of the U.S. dollar, the euro and the Japanese yen, as an anchor currency. The paper also examines the option of pegging to a basket of regional currencies, similar to the Asian Currency Unit (ACU), and discusses policy implications.
Ⅰ. Introduction
Ⅱ. Toward a Currency Union in Northeast Asia: Background and Rationale
Ⅲ. Econometric Methodology
Ⅳ. Data and Preliminary Tests
Ⅴ. Empirical Results
Ⅵ. Conclusion and Policy Implications