Real Effects of Common Currencies in East Asia
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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.
Series:
Working Paper No. 2007/166
Subject:
Currencies Economic integration Exchange rate arrangements Foreign exchange International trade Monetary unions Money Plurilateral trade Trade barriers
English
Publication Date:
July 1, 2007
ISBN/ISSN:
9781451867305/1018-5941
Stock No:
WPIEA2007166
Pages:
23
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