AN EMERGENCE OF A COMMON CURRENCY AREA IN THE SELECTED EAST ASIAN ECONOMIES: A REVISIT

The study attempts to re-investigate the possibility of emergence of a single currency area in East Asian (EA) countries by comparing both pre- and post-financial crisis periods. Using variance decomposition and impulse analyses, we investigated whether the selected EA economies — Hong Kong, Indonesia, Korea, Malaysia, the Philippines, and Singapore — are heavily segmented or instead integrated by focusing on the three different shocks, namely global-, regional-, and country-specific shocks. This paper finds that most economies could be described as heavily segmented, especially during the pre-crisis period (before July 1997). However, over time, the degree of segmentation experienced by some of these economies has declined significantly, particularly that of Hong Kong, Korea, and Singapore. The analyses also indicate that few economies, especially Indonesia and the Philippines, are being influenced by the performance of the Japanese economic growth to a greater extent than they were previously.