scholarly journals The influence of common currency on economic cycles of individual parts of currency union

2008 ◽  
Vol 56 (3) ◽  
pp. 345-361
Author(s):  
Eva Kaňková
Keyword(s):  
Currency Union ◽  
Common Currency ◽  
Economic Cycles

scholarly journals MACROECONOMIC SHOCKS ASYMMETRY: SEE AS AN OPTIMAL CURRENCY AREA

2013 ◽  
Vol 6 (2) ◽  
Author(s):  
Gjorgji Gockov ◽  
Kiril Jovanovski
Keyword(s):  
Currency Union ◽  
Optimum Currency Area ◽  
Common Currency ◽  
Macroeconomic Policies ◽  
Macroeconomic Shocks ◽  
Currency Area ◽  
Asymmetric Shocks ◽  
Key Variables ◽  
Oca Criteria ◽  
Optimum Currency

This paper has the goal to evaluate the existence of asymmetry of macroeconomic shocks between the SEE countries. It focuses on the Optimum Currency Area (OCA) theory to determine the readiness of any country to participate in a monetary union. The main goal of the study is to evaluate the OCA criteria for Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Greece, Macedonia, Montenegro, Kosovo, Serbia and Slovenia. The focus will be on the trade and financial links among these countries, the harmonization of business cycles and the similarities in the inflation movements. Going through often cited criteria for a successful currency union the paper will try to give conclusion for the possibilities to use the benefits of the OCA in the region.The paper will contribute with its assumptions that will be used in assessing the feasibility of a common currency area (CCA). That assumption will focus on the existence of the asymmetric shocks that will increase the costs of forming a CCA in SEE countries. In this paper, the comparative analysis of the key variables, policies and recommendations, gives profound basis for making conclusions related to the different macroeconomic policies behavior in terms of bad economic performance. Identification of the imbalances, national or international should give an answer for the dilemmas about the consistency of certain measure in terms of OCA.

Surmounting the Individual: Establishing a Common Currency in Asia – A Case Study of East Asian Economies

2013 ◽  
Vol 13 (1) ◽  
pp. 63-88
Author(s):  
Maryam Ishaq ◽  
Muhammad Atiq Ur Rehman
Keyword(s):  
Exchange Rate ◽  
Financial Crisis ◽  
East Asian ◽  
Currency Union ◽  
Structural Var ◽  
Forecast Errors ◽  
Common Currency ◽  
North East ◽  
Asian Economies ◽  
East Asian Economies

In the Ministerial meeting of ASEAN held in 1998, the devastation caused by Asian financial crisis remained the point of contemplation. The participants enthusiastically discussed the need to establish common currency and exchange rate system in order to counter any financial crisis anticipated. The ever-growing financial crisis threatening every region in the world has compelled the economists to acknowledge the elevating need of financial cooperation in their respective territories. This is certainly meant to ensure economic stability at both economic and political level. The authors, in the course of this paper, have focused the need to materialize the ideal of promoting monetary integration in the major economies of South, South East, and North East Asia. Calculating Optimum Currency Area (OCA) Index, the authors in a way present costs and benefits associated with the adoption of this currency union. Demand and supply sides of each economy are tested as a pre requisite of OCA in order to provide a good rationale in favor of selection of regions. For this purpose, Structural VAR Analysis (SVAR) method was employed and innovation accounting is done through variance decomposition of forecast errors, impulse response function and correlation matrix. The theory of OCA has been tested by (i) calculating the OCA index estimated by simple OLS method and (ii) following Bayoumi and Eichengreen extrapolating the variability of exchange rate data. The common consensus drawn from the two approaches adopted implies that there is a good potential in the region excluding China to construct a currency union particularly amongst South and North East Asian economies. It is worth mentioning, however, that some of these will have to work harder to join and become an effective member of this currency merger.

scholarly journals EXCHANGE RATE PASS-THROUGH IN ASEAN: IMPLICATIONS FOR THE PROSPECTS OF MONETARY INTEGRATION IN THE REGION

2009 ◽  
Vol 54 (04) ◽  
pp. 657-687 ◽  
Author(s):  
CARLOS CORTINHAS
Keyword(s):  
Exchange Rate ◽  
Currency Union ◽  
The Philippines ◽  
Monetary Integration ◽  
Common Currency ◽  
Domestic Prices ◽  
Pass Through ◽  
Using Data ◽  
Exchange Rate Pass Through ◽  
First Time

This paper investigates, for the first time, the degree of exchange rate pass-through to domestic prices in all five founding members of ASEAN. For this purpose, a three-variable-recursive VAR model was applied that uses the Choleski decomposition method along the distribution chain of pricing, using data for the period 1968 to 2001. The results show that a strong case for entering a currency union can be made for the cases of Singapore, Malaysia and Thailand, as in these countries there appears to be the case of exchange rate disconnect. A case for common currency can also be made for Indonesia but for entirely different reasons. For this country, an independent monetary policy is a clear source of shock to the economy and therefore a currency union would tend to eliminate them. Finally, a weaker case for a common currency can be made for the Philippines as evidence of some exchange rate pass-through to inflation was found but not to import prices.

Introduction of a Common Currency in the Union of the Russian Federation and the Republic of Belarus: Problems and Prospects

2004 ◽  
pp. 129-140
Author(s):  
B. Ryabov
Keyword(s):  
Russian Federation ◽  
State Of The Art ◽  
Currency Union ◽  
Costs And Benefits ◽  
Common Currency ◽  
Future Prospects ◽  
Institutional Integration ◽  
Currency Area ◽  
The Russian Federation ◽  
The Republic

The article is devoted to the analysis of introduction of a common currency in the Union of the Russian Federation and the Republic of Belarus. The article discusses costs and benefits of the currency union and the existence of an optimal currency area between Russia and Belarus. Possible directions of the process of institutional integration are considered, description of state-of-the-art is presented, future prospects and current handicaps are analyzed.

OPTIMAL MONETARY AND FISCAL POLICY IN A CURRENCY UNION WITH FRICTIONAL GOODS MARKETS

2019 ◽  
pp. 1-29 ◽  
Author(s):  
Pedro Gomis-Porqueras ◽  
Cathy Zhang
Keyword(s):  
Fiscal Policy ◽  
Open Economy ◽  
Optimal Policy ◽  
Currency Union ◽  
Regional Level ◽  
Common Currency ◽  
Economy Model ◽  
Friedman Rule ◽  
Monetary And Fiscal Policy ◽  
Region Search

We develop an open economy model of a currency union with frictional goods markets and endogenous search decisions to study optimal monetary and fiscal policy. Households finance consumption with a common currency and can search for locally produced goods across regions that differ in their market characteristics. Equilibrium is generically inefficient due to regional spillovers from endogenous search decisions. While monetary policy alone cannot correct this distortion, fiscal policy can help improve allocations by taxing or subsidizing production at the regional level. When households of only one region can search, optimal policy entails a deviation from the Friedman rule and a production subsidy (tax) if there is underinvestment (overinvestment) in search decisions. Optimal policy when households from both region search requires the Friedman rule and zero production taxes in both regions.

On The Determinants Of Currency Unions

2011 ◽  
Vol 5 (1) ◽  
Author(s):  
Alessandro Marchesiani
Keyword(s):  
Heritage Language ◽  
Bilateral Trade ◽  
Estimation Method ◽  
Currency Union ◽  
Geographical Distance ◽  
Currency Unions ◽  
Common Currency ◽  
Second Stage ◽  
Currency Area ◽  
Stage Estimation

This paper studies the determinants of currency union membership. Geographical distance, colonial heritage, language, sizes and bilateral trade between two countries as predictors of their propensity to adopt a common currency are accounted for. To deal with endogeneity, two-step probit estimation method is performed. The estimation results show that geography, colonial heritage, size, and speaking the same language predict monetary unions quite well. However, bilateral trade does not enter significantly in the second-stage estimation, thus revealing that bilateral transactions between two countries are not a useful indicator of their membership in a common currency area.

Finn Kydland and Edward Prescott: Driving Forces behind Economic Cycles (2004 Nobel Prize in Economics)

2005 ◽  
pp. 133-143 ◽  
Author(s):  
E. Balashova
Keyword(s):  
Nobel Prize ◽  
Driving Forces ◽  
Microeconomic Theory ◽  
Business Cycle Theory ◽  
Economic Cycles ◽  
Cyclical Fluctuations ◽  
Long Run ◽  
Time To Build ◽  
New Business ◽  
Extensive Research Program

The method of analyzing and modeling cyclical fluctuations of economy initiated by F. Kydland and E. Prescott - the 2004 Nobel Prize winners in Economics - is considered in the article. They proposed a new business cycle theory integrating the theory of long-run economic growth as well as the microeconomic theory of consumers and firms behavior. Simple version of general dynamic and stochastic macroeconomic model is described. The given approach which was formulated in their fundamental work "Time to Build and Aggregate Fluctuations" (1982) gave rise to an extensive research program and is still used as a basic instrument for investigating cyclical processes in economy nowadays.

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