Bilateral Trade and Intra-Regional Business Cycles: Is East Asia Feasible for a Currency Area?

2007 ◽  
Vol 7 (3) ◽  
pp. 1850113 ◽  
Author(s):  
Yu-Feng L. Lee
Keyword(s):  
Business Cycles ◽  
Bilateral Trade ◽  
East Asian ◽  
Currency Union ◽  
Optimum Currency Area ◽  
Regional Trade ◽  
Currency Area ◽  
Real Gdp ◽  
Optimum Currency ◽  
International Openness

This paper investigates the synchronization of the intra-East Asian business cycles based on regional bilateral trade statistics. By evaluating three macroeconomic fundamentals: real GDP, industrial production, and unemployment, it is found that tighter intra-East Asian trade may most likely lead to more idiosyncratic business cycles and hence lower correlations of economic activity. When using regional trade as an international openness criterion in the theory of Optimum Currency Area, the finding suggests that for the immediate future, the creation of an East Asian monetary/currency union may not be feasible.

scholarly journals Endogenitas dari Indikator Optimum Currency: Studi Empiris di Negara ASEAN

2006 ◽  
Vol 6 (2) ◽  
pp. 1-28
Author(s):  
Telisa Aulia Falianty
Keyword(s):  
Kalman Filter ◽  
Bilateral Trade ◽  
Free Trade Area ◽  
Currency Union ◽  
Structural Var ◽  
Optimum Currency Area ◽  
Currency Area ◽  
Trade Area ◽  
Asymmetric Shocks ◽  
Optimum Currency

Pembentukan suatu currency union adalah tahap terakhir dari langkah kebijakan menuju integrasi regional. Currency union biasa didefinisikan sebagai suatu area di mana mata uang tunggal beredar. Perdebatan mengenai adopsi dari common currency oleh negara-negara anggota ASEAN mulai bermunculan terutama sejak terjadinya krisis Asia 1997 dan setelah Euro menjadi kenyataan pada awal tahun 1999 dan tetap bertahan dengan baik sampai sekarang. Keinginan untuk membentuk currency union di Asia Timur dan ASEAN juga dipicu oleh semakin meningkatnya integrasi dalam perdagangan melalui ASEAN Free Trade Area (AFTA). Hal-hal tersebut melatarbelakangi penulis untuk mengadakan penelitian mengenai kemungkinan pembentukan currency union di ASEAN. Penelitian mengenai currency union pada umumnya dibagi menjadi tiga bagian besar, yaitu : kemungkinan pembentukan dilihat dari beberapa prasyarat pembentukan currency union (properti dari Optimum Currency Area), penghitungan Indeks Optimum Currency Area (OCA Index), dan endogeneitas dari indikator OCA. Paper ini akan memfokuskan pada studi empiris mengenai OCA index dan endogeneitas dari prasyarat pembentukan currency union.lndikator-indikator OCA dapat menjadi endogen terhadap variabel-variabel lain. Hal ini disebut sebagai endogeneitas dari indikator-indikator prasyarat pembentukan currency union. Asymmetric shocks sebagai salah satu indikator OCA endogen terhadap variabel perdagangan. Menurut Frankel dan Rose (1998), semakin tinggi level bilateral trade maka  semakin besar korelasi siklus bisnis antar negara dan semakin kecil ketidaksimetrisan antar negara dalam menghadapi guncangan (shocks). Menurut Fidrmuc (2001), konvergensi siklus bisnis terjadi melalui jalur intra industry trade. Dengan menggunakan Structural VAR dan Kalman Filter akan diteliti mengenai endogeneitas dari asymmetric shocks di ASEAN terhadap variabel perdagangan. Kalman Filter akan digunakan untuk menghitung time varying correlation coefficient antara negara-negara anggota ASEAN. Filter ini menggambarkan bagaimana time path dari parameter model. 

scholarly journals Monetary Union Accession and the Severity of Potential Asymmetric Shocks - the Case of Lithuania and Poland

Ekonomika ◽  
2008 ◽  
Vol 83 ◽  
Author(s):  
Radosław Kurach ◽  
Jerzy Stelmach
Keyword(s):  
Economic Policy ◽  
Business Cycles ◽  
Monetary Union ◽  
Currency Union ◽  
Optimum Currency Area ◽  
Seminal Paper ◽  
Currency Area ◽  
Asymmetric Shocks ◽  
Optimum Currency ◽  
Benefits And Costs

Monetary union accession generates benefits and costs for the entering countries. According to the seminal paper by Mundell (1961), the possible costs are usually associated with the asymmetric shocks that might take place. Under the currency union regime, these asymmetric shocks can be no longer neutralized by the countryspecific monetary policy tools, hence the flexibility of the economy is desirable.In this article, we employ the measure of business cycles correlation proposed by Artis and Zhang (1995) as well as labor market statistics to examine how easy the economies of Lithuania and Poland can adjust to asymmetric shocks in comparison to some other EU countries. Discussing the empirical results, we propose recommendations for economic policy that might help to fulfil the conditions of the Optimum Currency Area.

IS APEC SUITABLE FOR CURRENCY UNION?

2006 ◽  
Vol 51 (03) ◽  
pp. 325-334 ◽  
Author(s):  
YUTAKA KURIHARA
Keyword(s):  
Business Cycles ◽  
Currency Union ◽  
Economic Cooperation ◽  
Asia Pacific ◽  
Optimum Currency Area ◽  
Trade Intensity ◽  
Asia Pacific Economic Cooperation ◽  
Currency Area ◽  
Optimum Currency

The Asia-Pacific Economic Cooperation (APEC) was established in 1989. APEC member countries are remarkably different from each other in many respects. The traditional optimum currency area (OCA) theory may not be suitable for application to APEC. This paper stresses business cycles and trade intensity, which are included in OCA theory, and considers whether or not the "currency union" is suitable. The paper develops a procedure for applying OCA theory to APEC and examines these criteria while taking into account the endogeneity of these criteria. The result indicates that adopting the dollar for currency union is much more reasonable than adopting the yen.

scholarly journals Synchronization of business cycles in the selected European countries

2013 ◽  
Vol 60 (6) ◽  
pp. 759-773 ◽  
Author(s):  
Sasa Obradovic ◽  
Vladimir Mihajlovic
Keyword(s):  
Business Cycles ◽  
Foreign Trade ◽  
Correlation Coefficient ◽  
Euro Area ◽  
Pearson Correlation ◽  
Rank Correlation ◽  
Optimum Currency Area ◽  
Trade Volume ◽  
Currency Area ◽  
Optimum Currency

The synchronization of business cycles represents one of the conditions that countries have to fulfil to become part of an optimum currency area, as well as a condition for the efficient implementation of a common economic policy in these countries. This paper examines the extent to which Serbia and its neighbouring countries fulfil these conditions, taking the euro area as an optimum currency area. By applying the Hodrick-Prescott and the band-pass filters, as well as the Pearson correlation coefficient and the Spearman rank correlation coefficient, this paper examines the synchronization of business cycles in these countries. Taking Serbia as an example, the influence of the foreign trade volume between two countries on the similarity of their business cycles is tested. The results show a lower harmonization of business cycles in Serbia with those in the euro area, when compared with the selected neighbouring countries, and do not confirm the thesis on the influence of the foreign trade volume on the harmonization of business 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.

Optimum Currency Area Theory and Business Cycle Convergence in EMU

2016 ◽  
pp. 67-91
Author(s):  
Emin Ertürk ◽  
Derya Yılmaz ◽  
Işın Çetin
Keyword(s):  
Monetary Policy ◽  
Business Cycles ◽  
Business Cycle ◽  
Debt Crisis ◽  
Optimum Currency Area ◽  
Currency Area ◽  
The Business Cycle ◽  
The Times ◽  
Optimum Currency ◽  
Over Time

Which countries should be in Economic and Monetary Union (EMU)? This question has been debated frequently in the aftermath of the Sovereign Debt Crisis. But this has been asked in every stages of European integration. This discussion has rooted in the Optimum Currency Area (OCA) theory. The theory simply reveals that; if the countries have similar business cycles, one size fits all monetary policy would able to address the problems of member countries. Otherwise, no single monetary policy could be able to satisfy all members. In this respect, we test the business cycle convergence in EMU12 countries over time and we have also analyzed the effects of crisis on this convergence. We have found that business cycles converged over time in these countries. This convergence rises in the times of crisis as they slump together after the shock, but falls sharply in the aftermath of the crisis. This reflects the divergent recovery paths of the countries and put a pressure on single monetary policy especially after crisis.

Sign in / Sign up

Export Citation Format

Share Document