Real Effects of Common Currencies in East Asia

July 1, 2007

Preview Citation

Format: Chicago

Kazuko Shirono. Real Effects of Common Currencies in East Asia, (USA: International Monetary Fund, 2007) accessed November 21, 2024

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

Since the 1997 Asian currency crisis, new interest has emerged in the formation of a common currency area in East Asia. This paper provides estimates of trade and welfare effects of East Asian currency unions, using a micro-founded gravity model. Counter-factual experiments to assess the effects of various hypothetical currency arrangements for East Asia suggest that an East Asian currency union will double bilateral trade in the region, but the resulting welfare effects will be moderate. However, if Japan, a major trade partner for East Asia, is included in the union, welfare effects increase substantially. The evidence thus suggests that certain regional currency arrangements in East Asia will stimulate regional trade rigorously and can generate economically significant welfare gains.

Subject: Currencies, Economic integration, Exchange rate arrangements, Foreign exchange, International trade, Monetary unions, Money, Plurilateral trade, Trade barriers

Keywords: Arrangement in East Asia, Australia and New Zealand, Common currency, Common currency area, Common currency arrangement in East Asia, Currencies, Currency arrangement, Currency union, Currency union effect, East Asia, Exchange rate, Exchange rate arrangements, Gravity Model, Monetary unions, Plurilateral trade, Trade aspect of currency union, Trade barriers, Trade cost, Trade effect, Trade-creating effect, Trade-creating effect of a currency union, Welfare effect, WP

Publication Details

Pages:

23
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2007/166
Stock No:

WPIEA2007166
ISBN:

9781451867305
ISSN:

1018-5941

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