section_path: Economy/Monetary union
section_name: Monetary union
paragraph_text: Monetary union
  
  The concept of an Asian Currency Unit (ACU) started in the middle of the 1990s, prior to the 1997 Asian financial crisis. It is a proposed basket of Asian currencies, similar to the European Currency Unit, which was the precursor of the Euro. The Asian Development Bank is responsible for exploring the feasibility and construction of the basket. Since the ACU is being considered to be a precursor to a common currency, it has a dynamic outlook of the region. The overall goal of a common currency is to contribute to the financial stability of a regional economy, including price stability. It means lower cost of cross-border business through the elimination of currency risk. Greater flows of intra-trade would put pressure on prices, resulting in cheaper goods and services. Individuals benefit not only from the lowering of prices, they save by not having to change money when travelling, by being able to compare prices more readily, and by the reduced cost of transferring money across borders.
  
  However, there are conditions for a common currency: the intensity of intra-regional trade and the convergence of macroeconomic conditions. Substantial intra-ASEAN trade (which is growing, partly as a result of the ASEAN Free Trade Area (AFTA) and the ASEAN Economic Community.) and economic integration is an incentive for a monetary union. Member states currently trade more with other countries (80%) than among themselves (20%). Therefore, their economies are more concerned about currency stability against major international currencies, like the US dollar. On macroeconomic conditions, member states have different levels of economic development, capacity, and priorities that translate into different levels of interest and readiness. Monetary integration, however, implies less control over national monetary and fiscal policy to stimulate the economy. Therefore, greater convergence in macroeconomic conditions is being enacted to improve conditions and confidence in a common currency. Other concerns include weaknesses in the financial sectors, inadequacy of regional-level resource pooling mechanisms and institutions required to form and manage a currency union, and lack of political preconditions for monetary co-operation and a common currency.