Publication: Optimal currency area and anchor currency in Southeast Asia
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Issued Date
2016-01-01
Resource Type
ISSN
17569869
17569850
17569850
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2-s2.0-85013663559
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Mahidol University
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SCOPUS
Bibliographic Citation
International Journal of Economics and Business Research. Vol.12, No.3 (2016), 233-248
Suggested Citation
Thanarerk Thanakijsombat Optimal currency area and anchor currency in Southeast Asia. International Journal of Economics and Business Research. Vol.12, No.3 (2016), 233-248. doi:10.1504/IJEBR.2016.080333 Retrieved from: https://repository.li.mahidol.ac.th/handle/123456789/43261
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Title
Optimal currency area and anchor currency in Southeast Asia
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Abstract
© 2016 Inderscience Enterprises Ltd. This study examines the feasibility of the OCA formation and the selection of optimal anchor currency in ASEAN. Following the generalised purchasing power parity (G-PPP) framework, modern cointegration tests are employed on bilateral exchange rates involving ASEAN-5 currencies against four currencies of ASEAN's top trading partners during 2003-2014. The findings reveal that ASEAN members are not ready to form an OCA, as only a few significant bivariate and inconclusive multivariate cointegrating relationships can be found. With the eventual goal of forming a currency union, ASEAN policy makers may need to initially pursue bilateral economic and monetary integration led by Malaysia before extending the effort to the whole region. Significant long-run multivariate linkages among ASEAN currencies reveal no dominant anchor currency within the region, possibly due to the indifferent levels of trades and investments between ASEAN and each major trading partner. Lastly, endogenously determined break dates coincide with the 2008 global financial crisis (GFC) and reveal that ASEAN members may be affected by and may respond to the crisis at different timings, suggesting that past studies regarding ASEAN OCA may suffer from break-date selection bias.