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Are the Pacific Islands Ready for a Currency Union? An Empirical Study of Degree of Economic Convergence

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  • T. Jayaraman
  • B. Ward
  • Z. Xu

Abstract

During the 2003 Annual meeting of Pacific Forum leaders from the 16 member states (14 Pacific Islands and two advanced countries in the region, namely Australia and New Zealand) held in Auckland, an idea of a single currency for the region was mooted. The single currency was indicated to be the Australia dollar. The success of any efforts for achieving such a form of integration depends on the degree of economic convergence of national economies. There are two aspects of convergence: nominal and real. They cover exchange rates, growth rates and inflation rates. Unless there is a high degree of convergence in these spheres, the costs of any premature integration could be disastrous. The objective of this paper is to investigate whether there exists any case at present for a currency union. The paper undertakes an empirical investigation, reports the results and presents some conclusions.

Suggested Citation

  • T. Jayaraman & B. Ward & Z. Xu, 2007. "Are the Pacific Islands Ready for a Currency Union? An Empirical Study of Degree of Economic Convergence," Journal of the Asia Pacific Economy, Taylor & Francis Journals, vol. 12(4), pages 504-521.
    • Handle: RePEc:taf:rjapxx:v:12:y:2007:i:4:p:504-521
    DOI: 10.1080/13547860701594160
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    References listed on IDEAS

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    1. Paul Masson & Catherine Pattillo, 2002. "Monetary Union in West Africa: An Agency of Restraint for Fiscal Policies?," Journal of African Economies, Centre for the Study of African Economies, vol. 11(3), pages 387-412, September.
    2. Dr Don Brash, 2000. "The pros and cons of currency union: a Reserve Bank perspective," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 63, June.
    3. Ms. Catherine A Pattillo & Mr. Paul R Masson, 2001. "Monetary Union in West Africa (ECOWAS)," IMF Occasional Papers 2001/003, International Monetary Fund.
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    Cited by:

    1. Ramaprasad Bhar, 2010. "Stochastic Filtering with Applications in Finance," World Scientific Books, World Scientific Publishing Co. Pte. Ltd., number 7736, August.
    2. Emmanuel Numapau Gyamfi & Anokye Mohammed Adam & Emily Frimpomaa Appiah, 2019. "Macroeconomic convergence in the West African monetary zone: Evidence from rank tests," Economics and Business Letters, Oviedo University Press, vol. 8(4), pages 191-198.
    3. Willie Lahari, 2011. "Exchange Rate Volatility and Choice of Anchor Currency - Prospects for a Melanesian Currency Union," Working Papers 1111, University of Otago, Department of Economics, revised Oct 2011.

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