MONETARY INTEGRATION IN EAST ASIA: A CRITICAL REVIEW

This paper presents the case of fixed exchange rates and monetary union in East Asia, in connection to the theory of optimum currency areas (OCAs) which has been widely implemented in the field of exchange-rate regime. A total of 20 empirical papers published in 1994-2010 are reviewed and the original members of ASEAN are found to be commonly indicated as relatively feasible candidates for a monetary union. In addition, common threads are observed. First, in the selection of country samples for analysis, recent developments could have played a more important role than the traditional theory. Second, unlike the early intellectual work which had been molded by the debate on external and internal adjustment mechanisms, current empirical literature appears to be driven largely by the enthusiasm to identify homogenous economies. Third, there is a reason to believe that very few have reflected on the endogeneity argument of OCA-related convergence in the Asian context. Finally, an explicit monetary anchor country is scarcely set apriori in the studies.