East Asian Currency Area: A Fuzzy Clustering Analysis of Homogeneity

This paper attempts to examine the degree of homogeneity and the plausibility of a currency union in East Asia from the perspective of multiple OCA criteria, using the technique of fuzzy clustering analysis. The question of homogeneity is obviously of importance to the smooth formation and operation of the prospective currency union. We find that East Asia has not been sufficiently homogeneous and can be divided into about four groups with significant degree of fuzziness. We find no notable trend of convergence from the data. In fact, East Asian has appeared to be more diverged since the onset of the regional financial crisis. Thus, we suspect the possibility of forming a currency union in East Asia in the near future.