The Endogeneity of the Optimum Currency Area Criteria in East Asia

This Paper develops and investigates the relationship between the intensity of trade, industrial specialization and business cycle synchronization in East Asia. Using 19 years of data for eight East Asia countries, and using panel model approach, we have an empirical finding: the increased intra-region trade increases the business-cycle co-movements, and industrial specialization is negative correlation with business-cycle synchronization. It follows that countries are more likely to satisfy the criteria for entry into a currency union after taking steps toward economic integration than before.