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Prospects for Monetary Cooperation and Integration in East Asia

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Author Info

  • Ulrich Volz

    ()
    (German Development Institute)

Abstract

East Asian countries were notably uninterested in regional monetary integration until the late 1990s, when the Asian financial crisis revealed the fragility of the region's exchange rate arrangements and highlighted the need for a stronger regional financial architecture. Since then, the countries of East Asia have begun taking steps to explore monetary and financial cooperation, establishing such initiatives as regular consultations among finance ministers and central bank governors and the pooling of foreign exchange reserves. In this book, Ulrich Volz investigates the prospects for monetary cooperation and integration in East Asia, using state-of-the-art theoretical and empirical tools to analyze the most promising policy options. Volz points out that monetary cooperation can be defined broadly to include options ranging from informal policy consultations to European-style monetary union. He recommends a gradual approach toward monetary integration in East Asia, one that pursues less extensive forms of monetary cooperation before tackling such highly challenging projects as a regional exchange rate system or a regional monetary union. The simpler, less demanding forms of policy coordination would, Volz argues, allow East Asian countries to develop an integrationist spirit and gain experience in cooperation. Monetary integration is not an end in itself, Volz reminds us, but a means to promote economic and financial development and create a stable macroeconomic environment that is conducive to investment and growth. After providing an in-depth analysis of the costs and benefits of monetary integration, Volz examines different options for East Asian countries. He then proposes a strategy whereby countries first opt for a managed float of exchange rates guided by a regional currency basket into which an "Asian currency unit" is introduced as a virtual parallel currency to circulate alongside national currencies.

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Bibliographic Info

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This book is provided by The MIT Press in its series MIT Press Books with number 0262013991 and published in 2010.

Volume: 1
Edition: 1
ISBN: 0-262-01399-1
Handle: RePEc:mtp:titles:0262013991

Contact details of provider:
Web page: http://mitpress.mit.edu

Related research

Keywords: East Asia; monetary integration; monetary union; exchange rates;

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Cited by:
  1. Hamilton-Hart, Natasha, 2011. "Distribution, Domestic Politics and Monetary Cooperation in East Asia," ADBI Working Papers 332, Asian Development Bank Institute.
  2. Ulrich Volz, 2012. "Lessons of the European Crisis for Regional Monetary and Financial Integration in East Asia," Finance Working Papers 23189, East Asian Bureau of Economic Research.
  3. Yin-Wong Cheung & Menzie Chinn & Eiji Fujii, 2009. "Pitfalls in Measuring Exchange Rate Misalignment," Open Economies Review, Springer, vol. 20(2), pages 183-206, April.
  4. Yin-Wong Cheung & Menzie D. Chinn & Eiji Fujii, 2007. "The Overvaluation of Renminbi Undervaluation," CESifo Working Paper Series 1918, CESifo Group Munich.
  5. Volz, Ulrich, 2013. "RMB internationalisation and currency co-operation in East Asia," Working Papers 125, University of Leipzig, Faculty of Economics and Management Science.
  6. C. Randall Henning, 2012. "Choice and Coercion in East Asian Exchange Rate Regimes," Working Paper Series WP12-15, Peterson Institute for International Economics.
  7. Aggarwal, Raj & Muckley, Cal B., 2010. "Assessing co-ordinated Asian exchange rate regimes: Proposal for a possible move towards a common currency," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 20(2), pages 149-165, April.

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