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Asia confronts the impossible trinity

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  • Patnaik, Ila

    ()
    (National Institute of Public Finance and Policy)

  • Shah, Ajay

    ()
    (National Institute of Public Finance and Policy)

Abstract

In this paper, we examine capital account openness and exchange rate flexibility 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 flexibility, most Asian countries continue to have largely inflexible 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 flows are procyclical. The paper emphasises the case for a consistent monetary policy framework.

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Bibliographic Info

Paper provided by National Institute of Public Finance and Policy in its series Working Papers with number 10/64.

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Length: 44
Date of creation: Jan 2010
Date of revision:
Handle: RePEc:npf:wpaper:10/64

Note: Working Paper 64, 2010
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Web page: http://www.nipfp.org.in

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  1. 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.
  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. Ajay Shah & Ila Patnaik, 2009. "The Difficulties of the Chinese and Indian Exchange Rate Regimes," Working Papers id:2321, eSocialSciences.
  4. 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.
  5. Jushan Bai & Pierre Perron, 2003. "Computation and analysis of multiple structural change models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 18(1), pages 1-22.
  6. Ettore Dorrucci & Alexis Meyer-Cirkel & Daniel Santabárbara, 2009. "Domestic Financial Development in Emerging Economies: Evidence and Implications," Occasional Paper Series 102, European Central Bank.
  7. Jeffrey A. Frankel & Shang-Jin Wei, 2007. "Assessing China's Exchange Rate Regime," NBER Working Papers 13100, National Bureau of Economic Research, Inc.
  8. 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.
  9. Patnaik, Ila & Shah, Ajay, 2010. "Why India choked when Lehman broke," Working Papers 10/63, National Institute of Public Finance and Policy.
  10. 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.
  11. Reinhart, Carmen & Calvo, Guillermo, 2002. "Fear of floating," MPRA Paper 14000, University Library of Munich, Germany.
  12. Michael P. Dooley & David Folkerts-Landau & Peter Garber, 2003. "An Essay on the Revived Bretton Woods System," NBER Working Papers 9971, National Bureau of Economic Research, Inc.
  13. Joshua Aizenman, 2003. "On the Hidden Links Between Financial and Trade Opening," NBER Working Papers 9906, National Bureau of Economic Research, Inc.
  14. Bhattacharya, Rudrani & Patnaik, Ila & Shah, Ajay, 2008. "Early warnings of inflation in India," Working Papers 08/54, National Institute of Public Finance and Policy.
  15. 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.
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Cited by:
  1. 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.
  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. Simplice A Asongu, 2013. "How has politico-economic liberalization affected financial allocation efficiency? Fresh African evidence," Economics Bulletin, AccessEcon, vol. 33(1), pages 663-676.
  4. 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.
  5. Petar Vujanovic, 2011. "Understanding the Recent Surge in the Accumulation of International Reserves," OECD Economics Department Working Papers 866, OECD Publishing.
  6. Peter J. Morgan, 2013. "Monetary Policy Frameworks in Asia : Experience, Lessons, and Issues," Macroeconomics Working Papers 23639, East Asian Bureau of Economic Research.
  7. Asongu, Simplice A, 2013. "Liberalization and financial sector competition: a critical contribution to the empirics with an African assessment," MPRA Paper 52212, University Library of Munich, Germany.
  8. Peter J. Morgan, 2013. "Monetary Policy Frameworks in Asia : Experience, Lessons, and Issues," Finance Working Papers 23639, East Asian Bureau of Economic Research.
  9. Morgan, Peter J., 2013. "Monetary Policy Frameworks in Asia: Experience, Lessons, and Issues," ADBI Working Papers 435, Asian Development Bank Institute.
  10. 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.
  11. Ma, Guonan & McCauley, Robert N., 2013. "Is China or India more financially open?," Journal of International Money and Finance, Elsevier, vol. 39(C), pages 6-27.
  12. Catherine Figuière & Laëtitia Guilhot, 2011. "Évolution du rôle du yuan en Asie orientale : la guerre des monnaies aura-t-elle lieu ?," Post-Print halshs-00697581, HAL.

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