Real Effects of Common Currencies in East Asia

Author/Editor:

Kazuko Shirono

Publication Date:

July 1, 2007

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:

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. 07/166

Subject:

English

Publication Date:

July 1, 2007

ISBN/ISSN:

9781451867305/1018-5941

Stock No:

WPIEA2007166

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

23

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