oca criteria
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2020 ◽  
Vol 7 (2) ◽  
pp. 152
Author(s):  
Nurul Cholifah ◽  
Diah Wahyuningsih

Financial integration is the last step that can be done to achieve economic integration. One condition that must be met before the implementation of financial integration is the existence of the optimal currency area (OCA) criteria. The purpose of this study: 1) to find out the closeness of the currency to changes in the bilateral exchange rate as a supporter in the possibility of forming a single currency in the ASEAN region, 2) to analyze the chosen anchor currency which has a positive influence (appreciation) on the local currency of the ASEAN region as a currency single money region. This study uses annual real output data, size of GDP ratio, bilateral trade, differences in the composition of trade, and the exchange rate throughout of 1995-2018 period. The analytical method used is panel data test. The results showed that the currencies of ASEAN countries did not yet have the closeness of forming a single currency in the ASEAN region. Meanwhile, to determine the appropriate anchor currency to be used as a shared currency, namely SGD (Singapore Dollar) empirically has a positive influence (appreciation) in the ASEAN region compared to RMB, JPY, Euro, or USD. Therefore SGD can be proposed as an anchor currency for ASEAN countries.


2019 ◽  
Vol 4 (2) ◽  
pp. 223-236
Author(s):  
Memet Agustiar

The purpose of this study is to assess the readiness of 44 OIC member countries to form a currency union and to test whether the Optimum Currency Area (OCA) criteria remain relevant to a large region like the OIC. Large geographic size is subject to socio-economic and geographic disparities. This study employs the OCA-index to estimate the degree of readiness of the OIC to form a currency union. Five selected criteria –business cycle synchronization, trade openness, inflation similarity, the size of the economy, and distance – were employed to determine the OCA using Ordinary Least Squares regression. The findings of this study estimate that 63 percent of pairs of countries in the OIC are ready to form a currency union.  The selected OCA’s criteria present the best-fit variable in explaining the OCA for the OIC. This paper verifies that economic and geographic heterogeneities are not the main obstacle to forming a currency union.  This study provides an important contribution to the theory of OCA primarily in clarifying the application of the OCA conditions in a large observation like the OIC, which comprises many countries and many blocs.


2019 ◽  
Vol 38 (67) ◽  
Author(s):  
Chee-Heong Quah

This paper explores the domestic price level and trade competitiveness of Hong Kong in addition to the compatibility of this dollar-based currency board to the criteria inspired by the optimum currency area (OCA) theory. On price and competitiveness, findings point out that during the turmoil Hong Kong had not performed as well as that in the past and an apparent reason for this is the inflows of hot capital from abroad especially of the US that fuelled rising property prices. On conformity to the OCA criteria, the findings broadly corroborate the fixed exchange regime with the US as the monetary anchor country but at the same time China appears as a prospective contender to US as the monetary anchor. In the longer run, amidst the prolonged economic and monetary weaknesses in the US plus the emergence of renminbi as a global currency, Hong Kong might as well unify its exchange rate with the Chinese money.


Author(s):  
Emil Adámek ◽  
Stanislav Kappel

The euro area is the biggest monetary union in the World. In post-crisis time, the possibilities of creation a new monetary union are discussed again. The aim of this article is to evaluate, according to OCA criteria, an appropriateness of selected countries for a membership in a monetary union or for creation new monetary union. The second aim is to confront the existing monetary union – the euro area, with two potential monetary areas – NAFTA and MERCOSUR. The criteria are based on the OCA theory and partly on the so called OCA index. According to the results, there are countries (so called core countries) such as Austria or Luxemburg which reach satisfactory values. On the other hand there are countries such as Estonia, Finland, Latvia, Greece or Italy which reach worse values. Quite surprisingly, the values of most indicators (except for DISSIM) have worsened since the crisis in the euro area. It seems to be convenient for both Canada and Mexico to adopt a common currency with the USA. In case of MERCOSUR we could barely find a pair of countries with better values compare with euro area’s all-time average.


Author(s):  
Gjorgji Gockov ◽  
Kiril Jovanovski

This paper has the goal to evaluate the existence of asymmetry of macroeconomic shocks between the SEE countries. It focuses on the Optimum Currency Area (OCA) theory to determine the readiness of any country to participate in a monetary union. The main goal of the study is to evaluate the OCA criteria for Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Greece, Macedonia, Montenegro, Kosovo, Serbia and Slovenia. The focus will be on the trade and financial links among these countries, the harmonization of business cycles and the similarities in the inflation movements. Going through often cited criteria for a successful currency union the paper will try to give conclusion for the possibilities to use the benefits of the OCA in the region.The paper will contribute with its assumptions that will be used in assessing the feasibility of a common currency area (CCA). That assumption will focus on the existence of the asymmetric shocks that will increase the costs of forming a CCA in SEE countries. In this paper, the comparative analysis of the key variables, policies and recommendations, gives profound basis for making conclusions related to the different macroeconomic policies behavior in terms of bad economic performance. Identification of the imbalances, national or international should give an answer for the dilemmas about the consistency of certain measure in terms of OCA.


2012 ◽  
pp. 43-68
Author(s):  
Foresti Pasquale

This paper evaluates the advisability of a monetary union in Latin America applying the theory of optimum currency areas (OCA). The analysis is based on the traditional OCA criteria and it suggests that there is no evidence for any monetary integration in Latin America even at a sub-regional level. Latin American countries have evidenced a low degree of trade integration and asymmetric co-movements among their shocks. Moreover, substantial differences in the speed of adjustment and in the size of shocks are found. Hence, higher policy coordination seems to be necessary before starting any economic integration process in Latin America.


2011 ◽  
Vol 58 (5) ◽  
pp. 605-629 ◽  
Author(s):  
João Rebelo ◽  
Henrique Alves

As the euro is on its second decade, the European sovereign debt crisis and the ever more evident disparities in competitiveness among member states are prompting many to question whether monetary union is bringing more benefits than costs. The optimum currency area (OCA) theory provides a framework with several criteria for such analysis. In such context, we start by a descriptive analysis of the first twelve euro countries under six criteria, leading to a mixed conclusion on whether the EMU is closer or farther to fulfil them. Then we assess the impact of five OCA criteria on countries? relative competitiveness. Differences in the growth of unit labour costs, the dissimilarity of trade and the differences in output growth were found to be the most significant. This way, we identify some causes of the divergent competitiveness between some EMU countries that contributed to weaker economic growth in some of them.


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