THE ROLE OF ASEAN EXCHANGE RATE UNIT (AERU) FOR ASEAN-5 MONETARY INTEGRATION: AN OPTIMUM CURRENCY AREA CRITERIA

Authors

Dimas Bagus Wiranata Kusuma
Syed Mohammed Abud Ashif
Ali Musa Harahap
Muhammad Alam Omarsyah

Document Type

Article

Abstract

The idea for regional monetary integration is grounded by the process of convergence theory within the member states. The paper analyses the possibility of monetary union in ASEAN-5 countries, Indonesia, Malaysia, Philippines, Thailand, and Singapore. In terms of volatility, by using nominal deviation indicator assessment, the ASEAN-5 currencies are suggested to peg their national currencies into Yuan since it empirically brings the lowest level of volatility, both during normal and crisis periods. Therefore, Yuan could be proposed as the anchor currency for ASEAN-5 countries. Moreover, valuing the AERU in terms of a weighed average of Yuan is important to determine which countries are considered to be an Optimum Currency Area (OCA). The results statistically suggest that all ASEAN-5 countries could be grouped as OCA according to exchange rate stability criterion.Keywords : Optimum Currency Area, AERU, ASEAN-5, Exchange Rate StabilityJEL Classification : D81, E52, F15, F36

Recommended Citation

Wiranata Kusuma, Dimas Bagus; Abud Ashif, Syed Mohammed; Harahap, Ali Musa; and Omarsyah, Muhammad Alam (2013) "THE ROLE OF ASEAN EXCHANGE RATE UNIT (AERU) FOR ASEAN-5 MONETARY INTEGRATION: AN OPTIMUM CURRENCY AREA CRITERIA," Bulletin of Monetary Economics and Banking: Vol. 15: No. 3, Article 7.
DOI: https://doi.org/10.21098/bemp.v15i3.68
Available at: https://bulletin.bmeb-bi.org/bmeb/vol15/iss3/7

First Page

59

Last Page

88

Creative Commons License

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

Country

Malaysia

Affiliation

International Islamic University Malaysia