Monetary Cooperation Perspective in Central Asia

Abstract

Abstract Recent global economic and financial crisis and exchange rate volatilities in Eurasian countries caused significant impact on exchange arrangements and trade flows in Central Asian economies and thereby unveiled the necessity of monetary cooperation in the region. For this, current paper proposes a deviation measurement for coordinated exchange rate policies in Central Asian countries to enhance the regional monetary cooperation. Central Asian Currency Unit - CACU is calculated as a weighted average of Central Asian currencies against USD following the method used to calculate the European Currency Unit (ECU) and the Asian Monetary Unit (AMU) introduced by Ogawa and Shimizu (2005) for East Asian countries; and indicator that displays the degree of deviation of Central Asian currencies against CACU at the benchmark rate. Three types of CACU are considered in the paper based on nominal GDP, GDP measured at PPP and trade volume, while deviation indicator is grounded on arithmetic average of GDP at PPP and trade volume shares. Findings indicate that Central Asian currencies significantly deviate in terms of other Central Asian currencies. Furthermore, nominal and real deviation indicators signal that the trends vary in both the scales and directions. Thus, these measurements can be utilized for enhancing coordinated exchange rate policies among Central Asia.