CO-MOVEMENT 4 PERIOD ASEAN CURRENCY 1997-2005 A THEORY APPLICATION NAMELY OPTIMAL CURRENCY AREA USING VECTOR ERROR CORRECTION MODEL

Authors

Moch. Doddy Ariefianto, Bank Mandiri, IndonesiaFollow
Perry Warjiyo, Bank Indonesia, IndonesiaFollow

Document Type

Article

Abstract

Starting from the Optimum Currency Area (OCA), this paper utilize the Vector Error Correction Model (VECM) to identify the dynamic short term and the long term co-movement between the ASEAN 4 currencies, including their existing fundamental mechanism. There are at least 3 important findings, (i) the co-movement between the ASEAN 4 currencies is not proved empirically, (ii) the theory of OCA does not robust in explaining the co-movement pattern in ASEAN, and (iii) the existance of OCA is a global phenomena, indicated from the significance of Yen currency on the ASEAN 4. These findings led to a conclusion of this paper that the ongoing economic integration as well as the financial one in ASEAN are not enough to form a unified monetary arrangement nor a common currency in this region.JEL Classification : F02, F36, F33, C32Keywords : Co-Movement, Optimum Currency Area, Vector Error Correction Model.

Recommended Citation

Ariefianto, Moch. Doddy and Warjiyo, Perry (2010) "CO-MOVEMENT 4 PERIOD ASEAN CURRENCY 1997-2005 A THEORY APPLICATION NAMELY OPTIMAL CURRENCY AREA USING VECTOR ERROR CORRECTION MODEL," Bulletin of Monetary Economics and Banking: Vol. 12: No. 4, Article 2.
DOI: https://doi.org/10.21098/bemp.v12i4.380
Available at: https://bulletin.bmeb-bi.org/bmeb/vol12/iss4/2

First Page

447

Last Page

480

Creative Commons License

This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License

Country

Indonesia

Affiliation

Bank Mandiri