Exchange-Rate Arrangements and Financial Integration in East Asia: On a Collision Course?
AbstractFinancial integration in Ease Asia is actively being pursued and will in due course lead to substantial mobility of capital between economies in the region. Plans for monetary cooperation as a prelude to monetary integration and ultimately monetary unification are also proposed. These plans often suggest that central banks should adopt some form of common exchange rate policy in the transition period towards full monetary union. This paper argues that this is a dangerous path in the context of highly integrated financial markets. An alternative approach is proposed where independent central banks coordinate their monetary policies through the adoption of common objectives and by building an appropriate institutional framework. When this coordination process has progressed to the point where interest rate developments are similar across the region, and if in the meantime the required institutional infrastructure has been build, the next step towards monetary unification can be taken among those central banks that so desire. The claim is that this transition path is likely to be robust and will limit the risk of currency crises.
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Bibliographic InfoPaper provided by Bank of Greece in its series Working Papers with number 41.
Length: 43 pages
Date of creation: May 2006
Date of revision:
Note: On February 24-25, 2006 an international workshop on “Regional and International Currency Arrangements” was held in Vienna. It was co-sponsored by the Oesterreichische Nationalbank and the Bank of Greece, and jointly organized by Eduard Hochreiter and George Tavlas. Academic economists and researchers from central banks and international organizations presented and discussed current research, and reviewed and assessed the past experience with, and the future challenges of, international currency arrangements. A number of papers and the contributions by the discussants presented at this workshop are being made available to a broader audience in the Working Paper series of the Bank of Greece and simultaneously also in the Working Paper Series of the Oesterreichische Nationalbank. The papers and the discussants’ comments will be published in the journal, International Economics and Economic Policy. Here we present the third of these papers. (The previous two were issued as Bank of Greece Working Papers No. 39 and 40.) In addition to the paper by Hans Genberg, the Working Paper also contains the contributions of the discussants, Jim Dorn and Eiji Ogawa.
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Regional and International Currency Arrangements;
Other versions of this item:
- Hans Genberg, 2006. "Exchange-rate arrangements and financial integration in East Asia: on a collision course?," International Economics and Economic Policy, Springer, vol. 3(3), pages 359-377, December.
- Hans Genberg, 2006. "Exchange-Rate Arrangements and Financial Integration in East Asia: On a Collision Course?," Working Papers 152006, Hong Kong Institute for Monetary Research.
- Genberg, Hans, 2006. "Exchange-Rate Arrangements an Financial Integration in East Asia: On a Collision Course?," Working Papers 122, Oesterreichische Nationalbank (Austrian Central Bank).
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
- F15 - International Economics - - Trade - - - Economic Integration
- F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-11-18 (All new papers)
- NEP-CBA-2006-11-18 (Central Banking)
- NEP-IFN-2006-11-18 (International Finance)
- NEP-MON-2006-11-18 (Monetary Economics)
- NEP-SEA-2006-11-18 (South East Asia)
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