Description
My paper empirically assesses suitability of the South Asian common currency by testing for symmetry of underlying shocks. Following Mundell’s (1961) seminal work, a key precondition for the formation of a successful monetary union is that member countries face similar types of shocks for coordinated macroeconomic policy response, which paves the way for a currency union. I apply structural vector auto regression (SVAR) approach to determine the nature of shocks affecting the South Asian nations and to find out whether the South Asian Association for Regional Cooperation (SAARC) forms an optimal currency area (OCA).
Towards a South Asian common currency: Evidence from macroeconomic shocks
My paper empirically assesses suitability of the South Asian common currency by testing for symmetry of underlying shocks. Following Mundell’s (1961) seminal work, a key precondition for the formation of a successful monetary union is that member countries face similar types of shocks for coordinated macroeconomic policy response, which paves the way for a currency union. I apply structural vector auto regression (SVAR) approach to determine the nature of shocks affecting the South Asian nations and to find out whether the South Asian Association for Regional Cooperation (SAARC) forms an optimal currency area (OCA).