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Asia confronts the impossible trinity

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Author Info

  • Ila Patnaik

    (NIPFP)

  • Ajay Shah

Abstract

In this paper, we examine capital account openness and exchange rate exibility in 11 Asian countries. Asia has made slow progress on de jure capital account openness, but has made much more progress on de facto capital account openness. While there is a slow pace of increase in exchange rate exibility, most Asian countries continue to have largely inexible exchange rates. This combination { of moving forward with de facto capital account integration without bringing in exchange rate exibility { has lead to procyclicality of monetary policy when capital ows are procyclical. The paper emphasises the case for a consistent monetary policy framework.

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Bibliographic Info

Paper provided by East Asian Bureau of Economic Research in its series Macroeconomics Working Papers with number 22973.

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Date of creation: Jan 2010
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Handle: RePEc:eab:macroe:22973

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Postal: JG Crawford Building #13, Asia Pacific School of Economics and Government, Australian National University, ACT 0200
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Keywords: capital account openness; impossible trinity; exchange rate;

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References

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  1. Ajay Shah & Ila Patnaik, 2010. "Why India Choked when Lehman Broke," Working Papers id:2362, eSocialSciences.
  2. Zeileis, Achim & Shah, Ajay & Patnaik, Ila, 2010. "Testing, monitoring, and dating structural changes in exchange rate regimes," Computational Statistics & Data Analysis, Elsevier, vol. 54(6), pages 1696-1706, June.
  3. Ila Patnaik & Ajay Shah, 2009. "The difficulties of the Chinese and Indian exchange rate regimes," Macroeconomics Working Papers 22975, East Asian Bureau of Economic Research.
  4. Ajay Shah & Ila Patnaik & Rudrani Bhattacharya, 2008. "Early Warnings of Inflation in India," Working Papers id:1682, eSocialSciences.
  5. Lane, Philip R. & Milesi-Ferretti, Gian Maria, 2007. "The external wealth of nations mark II: Revised and extended estimates of foreign assets and liabilities, 1970-2004," Journal of International Economics, Elsevier, vol. 73(2), pages 223-250, November.
  6. Carmen M. Reinhart & Kenneth S. Rogoff, 2004. "The Modern History of Exchange Rate Arrangements: A Reinterpretation," The Quarterly Journal of Economics, MIT Press, vol. 119(1), pages 1-48, February.
  7. Reinhart, Carmen & Calvo, Guillermo, 2002. "Fear of floating," MPRA Paper 14000, University Library of Munich, Germany.
  8. Michael Dooley & David Folkerts-Landau & Peter Garber, 2005. "An essay on the revived Bretton Woods system," Proceedings, Federal Reserve Bank of San Francisco, issue Feb.
  9. Ettore Dorrucci & Alexis Meyer-Cirkel & Daniel Santabárbara, 2009. "Domestic Financial Development in Emerging Economies: Evidence and Implications," Occasional Paper Series 102, European Central Bank.
  10. BAI, Jushan & PERRON, Pierre, 1998. "Computation and Analysis of Multiple Structural-Change Models," Cahiers de recherche 9807, Universite de Montreal, Departement de sciences economiques.
  11. Ramachandran, M. & Srinivasan, Naveen, 2007. "Asymmetric exchange rate intervention and international reserve accumulation in India," Economics Letters, Elsevier, vol. 94(2), pages 259-265, February.
  12. Benassy-Quere, Agnes & Coeure, Benoit & Mignon, Valerie, 2006. "On the identification of de facto currency pegs," Journal of the Japanese and International Economies, Elsevier, vol. 20(1), pages 112-127, March.
  13. Eduardo Levy-Yeyati & Federico Sturzenegger, 2003. "To Float or to Fix: Evidence on the Impact of Exchange Rate Regimes on Growth," American Economic Review, American Economic Association, vol. 93(4), pages 1173-1193, September.
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Cited by:
  1. Asongu Simplice, 2013. "How has politico-economic liberalization affected financial allocation efficiency? Fresh African evidence," Working Papers 13/012, African Governance and Development Institute..
  2. Asongu Simplice & Michael E. Batuo, 2012. "The Impact of Liberalisation Policies on Inequality in Africa," Working Papers 12/038, African Governance and Development Institute..
  3. Asongu Simplice, 2013. "Liberalization and financial sector competition: a critical contribution to the empirics with an African assessment," Working Papers 13/031, African Governance and Development Institute..
  4. Enowbi Batuo, Michael & Asongu, Simplice A., 2012. "The impact of liberalisation policies on income inequality in african countries," MPRA Paper 43344, University Library of Munich, Germany.
  5. Peter J. Morgan, 2013. "Monetary Policy Frameworks in Asia : Experience, Lessons, and Issues," Finance Working Papers 23639, East Asian Bureau of Economic Research.
  6. Sunanda Sen, 2012. "Managing Global Financial Flows at the Cost of National Autonomy: China and India," Economics Working Paper Archive wp_714, Levy Economics Institute, The.
  7. Asongu, Simplice A., 2013. "Inequality, poverty and quality of institutions: which freedom channels of globalization matter for Africa?," European Economic Letters, European Economics Letters Group, vol. 2(1), pages 24-31.
  8. Guonan Ma & Robert N McCauley, 2013. "Is China or India more financially open?," BIS Working Papers 410, Bank for International Settlements.

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