Abstract
This paper aims to investigate whether the East Asian countries — ASEAN5, China, Korea, and Japan — have developed a matching Optimum Currency Area (OCA) theory in recent years because the establishment of stable exchange rate linkages and the enhancement of monetary policy credibility are needed for further economic developments in East Asia. In developing the earlier generalized purchasing power parity (G-PPP) model into an up-to-date nonlinear econometric model and considering the adoption of the Asian Monetary Unit (AMU) into this area, this paper could have positive empirical results, which suggest for forming a common currency area in East Asia.
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