Monetary Anchor for East Asia: US, Japan, or China?

19 Pages Posted: 5 Jun 2010 Last revised: 19 Jun 2010

See all articles by Chee-Heong Quah

Chee-Heong Quah

University of Malaya

Patrick M. Crowley

Texas A&M University - Corpus Christi; Bank of Finland/Suomen Pankki

Date Written: May 3, 2010


In this paper we apply the optimum currency area (OCA) criteria to assess the suitability of whether the United States, Japan, or China would best serve as monetary anchor country for East Asian countries. The criteria used are trade openness, business cycle synchronisation, real exchange rate volatility, inflation convergence, and real interest rate cycle synchronisation. The ‘performance’ of these potential anchor countries is compared before and after the Asian financial crisis. The findings suggest rising potentiality of China being the center country. In another aspect, the findings also broadly support the prevailing currency boards in Hong Kong and Macau and the monetary union between Singapore and Brunei.

Keywords: optimum currency area, Asia, monetary union, business cycle, China, money

JEL Classification: F33, N15

Suggested Citation

Quah, Chee-Heong and Crowley, Patrick M., Monetary Anchor for East Asia: US, Japan, or China? (May 3, 2010). Available at SSRN: or

Chee-Heong Quah (Contact Author)

University of Malaya ( email )

Kuala Lumpur, 50603

Patrick M. Crowley

Texas A&M University - Corpus Christi ( email )

6300 Ocean Drive, Unit #5808
Corpus Christi, TX 78412
United States


Bank of Finland/Suomen Pankki ( email )

P.O. Box 160
FIN-00101 Helsinki

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