A common currency peg in East Asia? Perspectives from Western Europe

Hwee Kwan Chow, Yoonbai Kim

Research output: Contribution to journalArticlepeer-review

59 Scopus citations

Abstract

In this paper we investigate the feasibility of a common currency peg in East Asia from the perspective of Western European countries. We find that domestic outputs of East Asian countries are strongly influenced by country-specific shocks while regional shocks are far more important in European countries that have joined the Economic and Monetary Union. The results are robust to various changes in specifications of the model. They suggest that East Asian countries are structurally different from each other and thus more likely to be subject to asymmetric shocks. Based on optimum currency area grounds, a common currency peg in East Asia would be more costly and difficult to sustain.

Original languageEnglish
Pages (from-to)331-350
Number of pages20
JournalJournal of Macroeconomics
Volume25
Issue number3
DOIs
StatePublished - Sep 2003

Bibliographical note

Funding Information:
We thank Reiny Iriana for her research assistance, Yung-hsiang Ying for his help with the data, two anonymous referees for their valuable comments, and Emily Cremers for editorial improvement. The remaining errors are our own. This research was supported by University Research Grant (No. 3992097) at the National University of Singapore.

Keywords

  • Common currency peg in East Asia
  • Country-specific shocks vs. regional shocks
  • Economic and monetary union
  • Optimum currency area

ASJC Scopus subject areas

  • Economics and Econometrics

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