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Co-Movement 4 Period Asean Currency 1997-2005 A Theory Application Namely Optimal Currency Area Using Vector Error Correction Model

Author

Listed:
  • Moch. Doddy Ariefianto

    (Bank Mandiri)

  • Perry Warjiyo

    (Bank Indonesia)

Abstract

Starting from the Optimum Currency Area (OCA), this paper utilize the Vector Error Correction Model (VECM) to identify the dynamic short term and the long term co-movement between the ASEAN 4 currencies, including their existing fundamental mechanism. There are at least 3 important findings, (i) the co-movement between the ASEAN 4 currencies is not proved empirically, (ii) the theory of OCA does not robust in explaining the co-movement pattern in ASEAN, and (iii) the existance of OCA is a global phenomena, indicated from the significance of Yen currency on the ASEAN 4. These findings led to a conclusion of this paper that the ongoing economic integration as well as the financial one in ASEAN are not enough to form a unified monetary arrangement nor a common currency in this region.

Suggested Citation

  • Moch. Doddy Ariefianto & Perry Warjiyo, 2010. "Co-Movement 4 Period Asean Currency 1997-2005 A Theory Application Namely Optimal Currency Area Using Vector Error Correction Model," Bulletin of Monetary Economics and Banking, Bank Indonesia, vol. 12(4), pages 447-480, April.
    • Handle: RePEc:idn:journl:v:12:y:2010:i:4g:p:447-480
    DOI: https://doi.org/10.21098/bemp.v12i4.380
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Pergerakan Bersama; Optimum Currency Area; Vector Error Correction Model;
    All these keywords.

    JEL classification:

    • F02 - International Economics - - General - - - International Economic Order and Integration
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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