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Is Greater China a currency union?

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  • Zhang, Zhaoyong
  • Sato, Kiyotaka
  • McAleer, Michael

Abstract

With the rapid flow of knowledge and capital from Hong Kong and Taiwan to Mainland China, a dynamic economy of “Greater China” has emerged, making the Chinese trio increasingly interdependent on trade and investment. In this paper we develop a three-variable VAR model to assess empirically the feasibility of forming a currency union in the Greater China area. The empirical results suggest that, from an economic perspective, it is feasible for the Chinese trio to move toward a currency union because of the increasing symmetry of shocks, the dynamic economic integration among the Greater China economies, and the speed of adjustment to shocks.

Suggested Citation

  • Zhang, Zhaoyong & Sato, Kiyotaka & McAleer, Michael, 2008. "Is Greater China a currency union?," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 78(2), pages 319-327.
    • Handle: RePEc:eee:matcom:v:78:y:2008:i:2:p:319-327
    DOI: 10.1016/j.matcom.2008.01.008
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