Scandinavian Working Papers in Economics
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Department of Economics, Lund University Working Papers, Department of Economics, Lund University

No 2005:6:
Is China an Optimum Currency Area?

Hans Byström (), Karin Olofsdotter () and Lars Söderström ()

Abstract: This paper analyzes regional differences across Chinese regions, employing an optimum currency area framework. Empirically, we consider the cross-sectional correlation measure of Solnik & Roulet (2000) when examining data on GDP, trade, inflation and regional budget between 1991 and 2001. Our preliminary results suggest that China probably is more of an optimum currency area than first expected. It is debatable, though, whether Hong Kong and Macao are appropriate as candidates. The results also indicate that there might be other constellations of regions that could be closer to an optimum currency area than the current Yuan area.

Keywords: China; optimum currency area; regional developments; cross-sectional correlation; (follow links to similar papers)

JEL-Codes: C32; F33; O53; (follow links to similar papers)

34 pages, January 25, 2005

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This paper is published as:
Byström, Hans, Karin Olofsdotter and Lars Söderström, (2005), 'Is China an Optimum Currency Area?', Journal of Asian Economics, Vol. 16, No. 4, pages 612-634

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