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Feasibility of an Asian Currency Unit

Author

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  • Abhijit Sen Gupta

    (Indian Council for Research on International Economic Relations)

  • Amitendu Palit

Abstract

In this paper we evaluate the feasibility of a common Asian Currency Unit (ACU) involving countries of East and South Asia. We analyze the various properties of an ACU and calculate its value using weighted averages of the values of Asian currencies. Looking at the movement of individual Asian currencies vis-a-vis the ACU, we find that there have been severe misalignments among the Asian currencies during the past seven years. We discuss the possibility of the Rupee figuring in the ACU and identify the major economic, political and historical impediments in the way of faster acceptance of ACU in the region. We point out the various strategies that could be employed to facilitate faster adoption of ACU. These include creating certain institutional safeguards as well as strengthening the existing ones. Finally, we highlight some ways to promote the use and acceptability of the ACU and also emphasize the importance of conceiving a larger framework of participating countries, including India.

Suggested Citation

  • Abhijit Sen Gupta & Amitendu Palit, 2008. "Feasibility of an Asian Currency Unit," Macroeconomics Working Papers 22164, East Asian Bureau of Economic Research.
    • Handle: RePEc:eab:macroe:22164
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    File URL: http://www.eaber.org/node/22164
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    References listed on IDEAS

    as
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    3. Kawai, Masahiro & Takagi, Shinji, 2000. "Proposed strategy for a regional exchange rate arrangement in post-crisis East Asia," Policy Research Working Paper Series 2503, The World Bank.
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    5. Takatoshi Ito & Anne O. Krueger, 1994. "Macroeconomic Linkage: Savings, Exchange Rates, and Capital Flows," NBER Books, National Bureau of Economic Research, Inc, number ito_94-1.
    6. Shingo Watanabe & Masanobu Ogura, 2006. "How Far Apart Are Two ACUs from Each Other? : Asian Currency Unit and Asian Currency Union," Bank of Japan Working Paper Series 06-E-20, Bank of Japan.
    7. Eiji Ogawa & Junko Shimizu, 2006. "AMU Deviation Indicator for Coordinated Exchange Rate Policies in East Asia and its Relation with Effective Exchange Rates," Discussion papers 06002, Research Institute of Economy, Trade and Industry (RIETI).
    8. Masahiro Kawai, 2008. "Toward A Regional Exchange Rate Regime In East Asia," Pacific Economic Review, Wiley Blackwell, vol. 13(1), pages 83-103, February.
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    11. Kenen,Peter B. & Meade,Ellen E., 2008. "Regional Monetary Integration," Cambridge Books, Cambridge University Press, number 9780521711500, September.
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    More about this item

    Keywords

    Asian Currency Unit; Regional Integration; Monetary cooperation;
    All these keywords.

    JEL classification:

    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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