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The fourteen Pacific island countries, under the auspices of their regionalorganization known as the Pacific Forum, launched two major initiatives in 2002to introduce unhindered trade amongst themselves by 2010 and usher in anenlarged fre trade area with Australia and New Zealand by 2015. Thus, tradeintegration efforts are expected to lead to greater economic integration of theregion. In the meanwhile, in 2003 Australia mooted the idea of a single currencyfor the region as a whole. Although the Pacific Forum, which also includesAustralia and New Zealand, has not formally discussed the proposal so far, thereis considerable debate ongoing on the subject of common currency. This paperexamines the patterns of shocks, which have affected the region during the last twodecades; seeks to investigate whether these shocks have been of similar nature;and evaluates whether these countries are presently suitable candidates for acurrency union so that union-wide policies in the event of a currency union can besuccessfully pursued. JEL classifications: F3, F4