Economic Feasibility of Malaysia and Singapore-Brunei Monetary Reunion: A Scrutiny during Major Financial Crises

  • Chee-Heong Quah Faculty of Business and Accountancy, University of Malaya, Malaysia
  • Yew-Joe Ho School of Economics and Management, Xiamen University Malaysia, Malaysia
Keywords: optimum currency area, monetary union, business cycle, Singapore, Brunei, Malaysia


This paper attempts to assess the feasibility of Malaysia to rejoin the monetary union with Singapore and Brunei which it left in 1973. The study scrutinizes particularly the period of two impactful financial crises in the last decades, namely the Asian Financial Crisis in 1997 and the US subprime-caused Global Financial Crisis in 2007-2009. Assessment is made in terms of the real convergence criteria suggested by optimum currency areas (OCA) theory and the nominal convergence criteria specified by the Maastricht Treaty. In light of the endogeneity view of convergence criteria, the relevant features of Malaysia are evaluated against those of Singapore and Brunei to infer the degree of preparedness of Malaysia to access the prevailing Singapore-Brunei monetary union. Results suggest that Malaysia could be as good a candidate as Brunei as a monetary union member with Singapore.


Download data is not yet available.


Artis M., & Zhang, W. (1997). International business cycles and the ERM: Is there a European business cycle? International Journal of Finance and Economics, 2(1), 1-16.

Artis, M., & Zhang, W. (2001). Core and periphery in EMU: A cluster analysis. Economic

Issues, 6(2), 39-59.

Artis, M., & Zhang, W. (2002). Membership of EMU: A fuzzy clustering analysis of alternative criteria. Journal of Economic Integration, 17(1), 54-79.

Bacha, O. I. (2008). A common currency area for ASEAN? Issues and feasibility. Applied Economics, 40(4), 515-529.

Baxter, M., & Stockman, A. C. (1989). Business cycles and the exchange-rate regime: Some international evidence. Journal of Monetary Economics, 23(3), 377-400.

Bayoumi, T., & Eichengreen, B. (1994). One money or many? Analyzing the prospects for monetary unification in various parts of the world. In M. B. Riccardi (Ed.), Princeton Studies in International Finance No. 76 (pp. 1-44). Princeton, New Jersey: International Finance Section, Princeton University.

Bayoumi, T., & Eichengreen, B. (1997). Ever closer to heaven? An optimum-currency-area index for European countries. European Economic Review, 41(3-5), 761-770.

Bayoumi, T., & Mauro, P. (2001). The suitability of ASEAN for a regional currency arrangement. The World Economy, 24(7), 933-954.

Boreiko, D. (2003). EMU and accession countries: Fuzzy cluster analysis of membership. International Journal of Finance and Economics, 8(4), 309-325.

Botero, J. C., Djankov, S., La Porta, R., Lopez-de-Silanes, F., & Schleifer, A. (2003). The regulation of labor. Quarterly Journal of Economics, 119(4), 1339-1382.

Boubaker, S., Jouini, J., & Lahiani, A. (2016). Financial contagion between the US and selected developed and emerging countries: The case of the subprime crisis. The Quarterly Review of Economics and Finance, 61, 14-28.

Chowdhry, B., & Goyal, A. (2000). Understanding the financial crisis in Asia. Pacific-Basin Finance Journal, 8(2), 135-152.

Corsetti, G., Pesenti, P., & Roubini, N. (1999). What caused the Asian currency and financial crisis? Japan and the World Economy, 11(3), 305-373.

Devereux, M. B. (2004). A tale of two currencies: The Asian crisis and the exchange rate regimes of Hong Kong and Singapore. Review of International Economics, 11(1), 38-54.

Edison, H., & Melvin, M. (1990). The determinants and implications of the choice of an exchange rate regime. In W. S. Haraf & T. D. Willett (Eds.), Monetary Policy for a Volatile Global Economy (pp. 1-50). Washington, DC: AEI Press.

Estrada Ruiz, M. A., Diwa, S., & Ho, Y. J. (2018). The external sector vulnerability monitoring index: The case of Chinese and ASEAN-5 Economies. Contemporary Economics, 12(3), 301-314.

Finger, J. M., & Kreinin M. E. (1979). A measure of ‘export similarity’ and its possible uses. The Economic Journal, 89(356), 905-912.

Fleming, J. M. (1971). On exchange rate unification. The Economic Journal, 81(323), 467-488.

Frankel, J., & Rose, A. (1998). The endogeneity of the optimum currency area criteria. The Economic Journal, 108(449), 1009-1025.

Gerlach, S. (1988). World business cycles under fixed and flexible exchange rates. Journal of Money, Credit and Banking, 20(4), 621-632.

Gerlach, S., & Gerlach-Kristen, P. (2006). Monetary policy regimes and macroeconomic outcomes: Hong Kong and Singapore (BIS Working Paper No. 204). Retrieved from

Goto, J., & Hamada, K. (1994). Economic preconditions for Asian regional integration. In T. Ito & A. O. Krueger (Eds.), Macroeconomic linkage: Savings, exchange rates, and capital flows (pp. 359-385). Chicago: University of Chicago Press.

Ho, Y. J., Tew, T. H., & Mansur, K. (2013). Income elasticity of demand in Malaysia during the period of fuel induced inflation. Actual Problems of Economics, 140(2), 404-416.

Ingram, J. (1962). Regional payments mechanisms: The case of Puerto Rico. Chapel Hill: University of North Carolina Press.

Kawai, M. (2008). Toward a regional exchange rate regime in East Asia. Pacific Economic Review, 13(1), 83-103.

Kawai, M., & Motonishi, T. (2005). Macroeconomic interdependence in East Asia: Empirical evidence and issues. In Asian economic cooperation and integration: Progress, prospects and issues (pp. 213-268). Manila: Asian Development Bank.

Kawai, M., & Takagi, S. (2005). Strategy for a regional exchange rate arrangement in East Asia: Analysis, review, and proposal. Global Economic Review, 34(1), 22-65.

Kenen, P. (1969). A theory of optimum currency areas: An eclectic view. In R. A. Mundell & A. K. Swoboda (Eds.), Monetary Problems of the International Economy (pp. 41-60). Chicago: University of Chicago Press.

Krugman, P. (1990). Policy problems of a monetary union. In P. de Grauwe & L. Papademos (Eds.), The European Monetary System in the 1990s. Harlow: Longman.

Lee, Y-H., Tucker, A. L., Wang, D. K., & Pao, H-T. (2014). Global contagion of market sentiment during the US subprime crisis. Global Finance Journal, 25(1), 17-26.

Lincoln, E. (2004). East Asian economic regionalism. Washington, DC: The Brookings Institution.

McKinnon, R. (1963). Optimum currency areas. American Economic Review, 53(4), 717-725.

McKinnon, R. I., & Schnabl, G. (2003). Synchronized business cycles in East Asia and fluctuations in the yen-dollar exchange rate. The World Economy, 26(8), 1067-1089.

Mishkin, F. S. (1999). Lessons from the Asian crisis. Journal of International Money and Finance, 18(4), 709-723

Mundell, R. (1961). A theory of optimum currency areas. American Economic Review, 51(4), 657-664.

Ngiam, K. J., & Yuen, H. (2001). Monetary cooperation in East Asia: A way forward. The Singapore Economic Review, 46(2), 211-246.

Nguyen, T. (2007). East Asian currency area: A fuzzy clustering analysis of homogeneity (Development and Policies Research Center Working Paper Series No. 2007/10). Retrieved from

Nicolas, F. (2010). De facto and de jure regional economic integration in East Asia: How do they interact? Singapore Economic Review, 55(1), 7-25.

Parrado, E. (2004). Singapore’s unique monetary policy: How does it work? (IMF Working Paper No.2004/10). Washington, DC: International Monetary Fund.

Quah, C.H. (2012). Is East Asia as prepared as Eurozone for monetary union? Journal of Business, Economics, and Management, 13(3), 471-488.

Quah, C. H. (2016). Economic feasibility of a BRICS monetary union. Global & Local Economic Review, 20(2), 1-29.

Quah, C. H. (2017). Exchange rate fixation between US, China, Japan and Eurozone. Journal of Applied Economic Research, 11(2), 99-120.

Quah, C. H. (2019). China’s dollar-linked Hong Kong during the Global crisis. Apuntes del CENES, 38(67), 95-121.

Quah, C. H., & Crowley, P. M. (2012). Which country should be the monetary anchor for East Asia: The US, Japan or China? Journal of the Asia Pacific Economy, 17(1), 94-112.

Soo, S. C., & Choong, C. K. (2010). An emergence of a common currency area in the selected East Asian economies: A revisit. Singapore Economic Review, 55(2), 353-376.

Tavlas, G. (1993). The “New” theory of optimum currency areas, The World Economy, 16(6), 663-685.

Vaubel, R. (1978). Strategies for currency unification: The economics of currency competition and the case for a European parallel currency. Tubingen: Mohr.

How to Cite
Quah, C.-H., & Ho, Y.-J. (2020). Economic Feasibility of Malaysia and Singapore-Brunei Monetary Reunion: A Scrutiny during Major Financial Crises. pplied conomics ournal, 27(1), 23-51. etrieved from
Research Articles