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Journal of Economic Integration 2018 September;33(3) :572-603.
DOI: https://doi.org/10.11130/jei.2018.33.3.572
Is South Asia an Optimum Currency Area?
Biswash Gauchan and 
Vishal Sarin 
Mittal School of Business, Lovely Professional Universiy, Phagwara, Punjab, India
Corresponding Author: Biswash Gauchan ,Tel: 1824444213, Fax: 1824506111, Email: biswas.gauchan@gmail.com
Copyright ©2018 Journal of Economic Integration
ABSTRACT
We assess whether the South Asian Association of Regional Cooperation is an Optimum Currency Area by analyzing the symmetry of structural shocks. The result shows that SAARC countries experience asymmetric patterns of shocks, which implies the region is not yet ready for a common currency. However, we also find the increased number of positive correlation such as GDP growth, inflation, exchange rates movements and supply shocks compared to the results in the previous studies. Thus, macroeconomic convergence is ongoing among the countries, which can underpin the basis for greater monetary cooperation.

JEL Classification
E42: Monetary Systems; Standards; Regimes; Government and the Monetary System; Payment Systems
F15: Economic Integration
F33: International Monetary Arrangements and Institutions
F36: Financial Aspects of Economic Integration
N15: Asia including Middle East
Keywords: South Asia | SVAR | Monetary integration
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