A single currency for the Pacific island countries: A stepwise approach

Two agreements, the Pacific Agreement on Closer Economic Relations and the Pacific Island Countries Trade Agreement, which were signed in August 2001, are important milestones towards greater regional integration in the south Pacific. In addition to trade integration, the adoption of a single currency for 12 countries in Europe and similar efforts in the Eastern Caribbean Currency Union have kindled new interest in the subject. This paper seeks to examine, as a first step, the feasibility of a single currency for a compact group of the Melanesian island countries, which share many commonalities.