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Monetary and Financial Cooperation among Central Banks in East Asia and the Pacific

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Author Info

  • Hans Genberg

    (Research Department, Hong Kong Monetary Authority)

  • Dong He

    (Research Department, Hong Kong Monetary Authority)

Abstract

In this paper we show that monetary policy frameworks in the East Asia and Pacific region are heterogeneous, with exchange rate policies being subordinate to domestic price stability objectives in most regional economies. We then argue that in this environment it is undesirable to focus regional cooperation on exchange rate policies because of the risk of creating conflicts with domestic objectives that would lead to loss of central bank credibility and possibly speculative attacks. We also argue that the case for coordinated exchange rate policies is in fact weak, even after taking into account the region¡¦s traditional emphasis on export performance and increasing regional trade integration. Rather than focusing cooperation on the setting of policy instruments, we suggest an alternative that centres on developing more liquid financial markets in the region in the foreseeable future, and on harmonising the objectives of monetary policy and designing institutions that could form the basis of deeper forms of cooperation in the longer-term future.

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File URL: http://www.info.gov.hk/hkma/eng/research/working/pdf/HKMAWP07_15_full.pdf
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Bibliographic Info

Paper provided by Hong Kong Monetary Authority in its series Working Papers with number 0715.

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Length: 25 pages
Date of creation: Nov 2007
Date of revision:
Handle: RePEc:hkg:wpaper:0715

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Related research

Keywords: Regional monetary cooperation; exchange rate coordination; East Asia;

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Cited by:
  1. Genberg, Hans & Siklos, Pierre L., 2010. "Revisiting the shocking aspects of Asian monetary unification," Journal of Asian Economics, Elsevier, vol. 21(5), pages 445-455, October.
  2. He, Dong, 2011. "Asian regional policy coordination - commentary," Proceedings, Federal Reserve Bank of San Francisco, issue Nov, pages 293-299.
  3. Andrew Filardo, 2009. "Short-Term Policy Responses to the International Financial Crisis and Risks to Sustainable Medium-Term Policy Frameworks in Asia : Complications Arising from Enduring Global Imbalances," EABER Working Papers 22862, East Asian Bureau of Economic Research.
  4. Dong He & Wei Liao, 2012. "Asian Business Cycle Synchronization," Pacific Economic Review, Wiley Blackwell, vol. 17(1), pages 106-135, 02.
  5. Filardo, Andrew & Genberg, Hans, 2010. "Monetary Policy Strategies in the Asia and Pacific Region: What Way Forward?," ADBI Working Papers 195, Asian Development Bank Institute.

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