The idea of having a common Asian currency was conceived after the South East Asian countries faced currency crises in the late 1990s. It was felt that, having a common currency would provide enough stability to counter such problems in future. Coupled with this, the strengthening of euro as the European common currency further championed the cause of having a unified currency across Asia. This article discusses the feasibility of Asian common currency in the backdrop of the recently concluded 39th annual convention of the Asian Development Bank.

Should a country have its own separate currency or whether it should enter into a common currency union can be simply explained in terms of benefits and cost. In simple terms, if the benefits are more than the cost, logic says that a country can enter into a currency union. Well, if issues had been so simply resolved, then there would have been researches, studies and economists. So, before getting into the details of the concerned issues, let us first understand the economics of a common currency.

The Asian crisis of 199798 has left an indelible impression on the minds of many. Since then, the very idea of having a common Asian currency has been encouraged. Drawing lessons from the euro, it was further suggested that, the Asian countries should collectively peg their currencies to the dollar, yen or a basket of currencies and establish a monetary grid like the European Monetary Union. This would provide the benefits of boosting intraregional trade, investments and also facilitate the crossborder participation of the regional bond markets. Nobel Laureate Economist Robert Mundell commented that the launch of the euro in 2000 was an obvious culmination of the European Monetary Union. One of the primary requirements of a monetary union lies in the creation of an Optimum Currency Union (OCA). Mundell's study on the OCA is truly commendable. From the very beginning, he observed that America, Europe and Asia are seeking three separate OCAs. Today, most of American countries are dollarized to the US currency while Europe has introduced the euro that has replaced 15 individual currencies.

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