Pacific Island Countries: Possible Common Currency Arrangement

Author/Editor:

David William Harold Orsmond ; Christopher Browne

Publication Date:

October 1, 2006

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

This paper examines the potential advantages and disadvantages of adopting a common currency arrangement among the six IMF member Pacific island countries that have their own national currency. These countries are Fiji, Papua New Guinea, Samoa, Solomon Islands, Tonga, and Vanuatu. The study explains that the present exchange rate regimes-comprising pegging to a basket of currencies for five countries and the floating arrangement for Papua New Guinea-have generally succeeded in avoiding inflationary, balance of payments, external debt, and financial system problems. The study concludes that adopting a common currency in the Pacific would require greater convergence of domestic policies and substantial strengthening of regional policies, which would take time to achieve.

Series:

Working Paper No. 2006/234

Subject:

Currencies Exchange rate arrangements Exchange rate policy Exchange rates Monetary unions

English

Publication Date:

October 1, 2006

ISBN/ISSN:

9781451864946/1018-5941

Stock No:

WPIEA2006234

Pages:

18

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