Are the pacific island countries ready for a single currency?

The introduction of the euro in 1999 has led to many initiatives and inquiries in other regions regarding the merits and prospects of currency unions. One of the regions where a currency union has been of interest is the Pacific island countries along with Australia and New Zealand. This paper investigates the degree of economic convergence among these countries and maps out the movement of regional currencies with the core currency, the Australian dollar. Overall, we found the economies in this region show a trend toward divergence. While most currencies closely moved with the Australian dollar, the evidence suggests such a currency union may be premature at this time.