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Is South Asia an Optimum Currency Area?

Author

Listed:
  • Gauchan, Biswash

    (Mittal School of Business, Lovely Professional Universiy)

  • Sarin, Vishal

    (Mittal School of Business, Lovely Professional University)

Abstract

We assess whether the South Asian Association of Regional Cooperation is an Optimum Currency Area by analyzing the symmetry of structural shocks. The result shows that SAARC countries experience asymmetric patterns of shocks, which implies the region is not yet ready for a common currency. However, we also find the increased number of positive correlation such as GDP growth, inflation, exchange rates movements and supply shocks compared to the results in the previous studies. Thus, macroeconomic convergence is ongoing among the countries, which can underpin the basis for greater monetary cooperation.

Suggested Citation

  • Gauchan, Biswash & Sarin, Vishal, 2018. "Is South Asia an Optimum Currency Area?," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 33(3), pages 572-603.
    • Handle: RePEc:ris:integr:0753
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    More about this item

    Keywords

    South Asia; SVAR; Monetary integration;
    All these keywords.

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • F15 - International Economics - - Trade - - - Economic Integration
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • N15 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Asia including Middle East

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