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The paper undertakes the structural VAR analysis to assess the suitability of a common currency in South Asia. The empirical result shows that the countries in the region face different structural shocks, hence the region is not an optimum currency area. The monetary integration in South Asia shall not be construed as one having a common currency. It would rather mean a greater role for the Indian Currency in the region. A sub-regional approach to achieving greater monetary integration would be instrumental in fostering greater economic integration in the region.
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Vishal Sarin (2023) studied this question.
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