Title

An Optimum Currency Area in South Asia: Is it Plausible?

Document Type

Article

Department or Administrative Unit

Economics

Publication Date

2006

Abstract

This article is an empirical investigation of the potential feasibility of an optimum currency area (OCA) in South Asia. Under an OCA, member countries share a common currency (like the Euro), and forego autonomy with respect to monetary policy instruments. Countries are good candidates for forming an OCA if there is a long-run relationship in the trend (permanent) component of output. Our results indicate existence of such a long-run relationship in the trend component of gross domestic product (GDP) among the member countries in South Asia. Hence, the South Asia region has the potential to form an OCA.

Comments

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Journal

Journal of World Trade