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Turner College Economist Wen Shi Explores Feasibility of a Laos-China Currency Zone

A new study by Turner College economist Wen Shi and her colleagues Wei Sun and Yi Zhou, both of Grand Valley State University, empirically assesses whether Laos is a suitable candidate for a potential Renminbi zone under the Belt and Road Initiative (BRI). More specifically, the authors combine optimum currency area theory with a two-country structural model to identify structural shocks and analyze the impacts of China’s supply and demand shocks on Laos’ gross domestic product and price level. The paper, set to appear in a future issue of the Journal of Chinese Economic and Foreign Trade Studies, finds that the BRI has played a positive role in promoting Laos−China economic integration. Over time, the effects of China’s macroeconomic shocks not only increased but also became the dominant force driving Laos’ economy during the BRI period of 1999–2023. Ultimately, the findings suggest that joining a Renminbi zone may be feasible for Laos as the BRI continues to strengthen economic ties between the two countries.


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