HOW MANY CURRENCIES IN SAARC COUNTRIES? A MULTIVARIATE STRUCTURAL VAR APPROACH

This paper examines whether or not the South Asian Association Regional Cooperation (SAARC), can introduce a single currency across the region. A four-variable structural vector autoregressive (SVAR) model is used to identify the underlying shocks and to examine the correlation in shocks for a speci...

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Bibliographic Details
Published in:The Journal of developing areas 2014-10, Vol.48 (4), p.265-286
Main Author: Forhad, Md. Abdur Rahman
Format: Article
Language:English
Subjects:
Cooperation
Correlation
Currencies
Currency
Foreign exchange rates
Free trade
GDP
Gross Domestic Product
Literature reviews
Macroeconomics
Monetary policy
Monetary unions
Multivariate analysis
Objectives
Population density
Population growth
Prime ministers
Regional cooperation
Socioeconomic factors
Studies
Tariffs
Trade
Trade liberalization
Vector-autoregressive models
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Summary:This paper examines whether or not the South Asian Association Regional Cooperation (SAARC), can introduce a single currency across the region. A four-variable structural vector autoregressive (SVAR) model is used to identify the underlying shocks and to examine the correlation in shocks for a specified sample period of 1974-2010. The results show asymmetric correlations among domestic shocks, which do not suggest forming a common currency area across the region. The paper also finds lower factor mobility; lower degree of intra-regional trades, and lack of political cooperation, suggesting the SAARC countries are not yet ready to introduce a common currency.
ISSN:0022-037X
1548-2278
1548-2278
DOI:10.1353/jda.2014.0062