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researched by Dr. Telisa Aulia Falianty dan Britany Alasen Sembiring, SE

The monetary policy integration is a pre-requisite to achieve the regional integration such as the Optimum Currency Area (OCA) in ASEAN. In addition the regional integration also requires similarities in inflation, symmetrical supply and demand shock, and an integrated fiscal policy among the member countries. This paper focus on this issue.
Using the Structural Vector Autoregressive method on ASEAN data (Malaysia, Indonesia, Filipina and Thailand) from 2001-2007, this paper confirm the convergence on the inflation, the interest rate, the exchange rate and other macroeconomic variables among these countries. These suggest the necessity to build an integrated monetary policy framed in Inflation Targeting Framework (ITF) to smooth the creation of the Optimum Currency Area in ASEAN. Based on the estimation result, the implementations of the ITF had increased the macroeconomic convergence in ASEAN member since 2002. The effect is even larger as the trade increase.

Keywords: Optimum Currency Area, integration, inflation, ITF, ASEAN.
JEL Classification: E31, E52, F36

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