ASSESSING THE FEASIBILITY OF FORMING A COMMON CURRENCY AREA AMONG ECO COUNTRIES: BAYESIAN STATE-SPACE APPROACH

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ASGHARPUR HOSSEIN; SALMANI BEHZAD; RAZZAGHI SOMAYEH

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Journal: Journal of Economic Research and Policies Year:2016 | Volume:24 | Issue:77 Page(s): 95-114

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Title

ASSESSING THE FEASIBILITY OF FORMING A COMMON CURRENCY AREA AMONG ECO COUNTRIES: BAYESIAN STATE-SPACE APPROACH

Author(s)

ASGHARPUR HOSSEIN | SALMANI BEHZAD | RAZZAGHI SOMAYEH | Issue Writer Certificate

Keywords

OPTIMUM CURRENCY AREAQ1

ECO ORGANIZATIONQ1

BAYESIAN STATE-SPACEQ1

VARIANCE DECOMPOSITIONQ1

Abstract

The purpose of this article is to investigate the feasibility of forming an OPTIMUM CURRENCY AREA among Economic Cooperation Organization (ECO) member countries. One of the most important criteria in forming currency: union: between countries of one reign is synchronization of economic shocks. In other words, if fluctuations of macroeconomic variables source of regional member countries are regional shocks, then forming a monetary: union: between those countries would be an appropriate policy. This paper uses BAYESIAN STATE-SPACE model in order to obtain the sources of macroeconomic fluctuations in ECO countries. And fluctuations in GDP, consumption and investment in these countries were due to 4 non-observable factors of world common shocks, regional common shocks, country specific shocks and idiosyncratic shocks. The results indicate that regional shocks don’t play a predominant role in explaining fluctuations of gross domestic production, consumption and investment in ECO member countries. Although, the share of regional shocks in macroeconomic shocks has been increased after forming the ECO ORGANIZATION, but still the country shocks has the most important role in explaining macroeconomic fluctuations. Then according to results, the policymakers should apply independent monetary policy encountering business cycles, so the use of a common currency area among ECO countries is not a proper monetary policy.

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APA: Copy

ASGHARPUR, HOSSEIN, SALMANI, BEHZAD, & RAZZAGHI, SOMAYEH. (2016). ASSESSING THE FEASIBILITY OF FORMING A COMMON CURRENCY AREA AMONG ECO COUNTRIES: BAYESIAN STATE-SPACE APPROACH. JOURNAL OF ECONOMIC RESEARCH AND POLICIES, 24(77), 95-114. SID. https://sid.ir/paper/89497/en

Vancouver: Copy

ASGHARPUR HOSSEIN, SALMANI BEHZAD, RAZZAGHI SOMAYEH. ASSESSING THE FEASIBILITY OF FORMING A COMMON CURRENCY AREA AMONG ECO COUNTRIES: BAYESIAN STATE-SPACE APPROACH. JOURNAL OF ECONOMIC RESEARCH AND POLICIES[Internet]. 2016;24(77):95-114. Available from: https://sid.ir/paper/89497/en

IEEE: Copy

HOSSEIN ASGHARPUR, BEHZAD SALMANI, and SOMAYEH RAZZAGHI, “ASSESSING THE FEASIBILITY OF FORMING A COMMON CURRENCY AREA AMONG ECO COUNTRIES: BAYESIAN STATE-SPACE APPROACH,” JOURNAL OF ECONOMIC RESEARCH AND POLICIES, vol. 24, no. 77, pp. 95–114, 2016, [Online]. Available: https://sid.ir/paper/89497/en

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