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A Roadmap for the Asian Exchange Rate Mechanism

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  • Gongpil Choi

    (Korea Institute for International Economic Policy)

  • Deok Ryong Yoon
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    Abstract

    Given the increaing importance of capital market development for financial stability and mulitlateral cooperation for sustained growth, a country's choice of exchange rate regime is hardly trivial. Instead of relying on a series of individually managed floats, it would be better for each country to target its currency against a basket of other currencies. A still much better alternative would be to form a regional block, which would tie Asian currencies together and create a regional currency while allowing them to float against major currencies. Whether the type is an individual peg to a tailored basket or a multilateral peg to a common basket remains to be determined. Under any plausible scenario, some type of regional currency needs to be developed to promote an environment suitable for financial and monetary cooperation that is, in turn, conducive to capital market development. Since conditions in th region are increasingly favorable for an OCA (Optimal Currency Area), such cooperation would be mutually beneficial as well as globally desirable.

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    Bibliographic Info

    Paper provided by East Asian Bureau of Economic Research in its series Macroeconomics Working Papers with number 21960.

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    Date of creation: Jan 2005
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    Handle: RePEc:eab:macroe:21960

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    Related research

    Keywords: ACU; Asian Currency Unit; Asian Exchange Rate;

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    Cited by:
    1. Barbara Fritz & Laurissa Mühlich, 2006. "Regional Monetary Integration among Developing Countries: New Opportunities for Macroeconomic Stability beyond the Theory of Optimum Currency Areas?," GIGA Working Paper Series 38, GIGA German Institute of Global and Area Studies.
    2. Woosik Moon & Yeongseop Rhee & Deokryong Yoon, 2006. "Regional Currency Unit in Asia : Property and Perspective," Macroeconomics Working Papers 21972, East Asian Bureau of Economic Research.
    3. Fritz, Barbara & Mühlich, Laurissa, 2007. "South-south monetary integration: the case for a research framework beyond the theory of optimum currency area," Discussion Papers 2007/20, Free University Berlin, School of Business & Economics.

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