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Use of National Currencies for Trade Settlement in East Asia: A Proposal

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  • Lee, Il Houng

    (Asian Development Bank Institute)

  • Park, Yung Chul

    (Asian Development Bank Institute)

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    Abstract

    This paper develops a multilateral currency system where national currencies are used for trade settlement in East Asia, comprising the Association of Southeast Asian Nations (ASEAN) member countries, the People’s Republic of China, Japan, and the Republic of Korea (ASEAN+3). The currency scheme is expected to mitigate the risks associated with independent attempts at internationalization in non-convertible currency countries. It could also reduce dependence on the US dollar, safeguard against financial spillovers from outside, and deepen trade and financial integration in the region. The patterns and structure of trade and financial openness suggest that East Asia has already established an economic base upon which it could launch such a system. The experience with renminbi internationalization will help the Republic of Korea and ASEAN-5 to emulate this strategy.

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    File URL: http://www.adbi.org/files/2014.04.11.wp474.currencies.trade.east.asia.pdf
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    Bibliographic Info

    Paper provided by Asian Development Bank Institute in its series ADBI Working Papers with number 474.

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    Length: 31 pages
    Date of creation: 13 Apr 2014
    Date of revision:
    Handle: RePEc:ris:adbiwp:0474

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    Related research

    Keywords: currency internationalization; RMB internationalization; trade invoicing and settlement;

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    1. Shinji Takagi, 2011. "Internationalising the yen, 1984-2003: unfinished agenda or mission impossible?," BIS Papers chapters, in: Bank for International Settlements (ed.), Currency internationalisation: lessons from the global financial crisis and prospects for the future in Asia and the Pacific, volume 61, pages 75-92 Bank for International Settlements.
    2. Wignaraja, Ganeshan, 2013. "Regional Trade Agreements and Enterprises in Southeast Asia," ADBI Working Papers 442, Asian Development Bank Institute.
    3. Ganeshan Wignaraja, 2013. "Regional Trade Agreements and Enterprises in Southeast Asia," Trade Working Papers 23718, East Asian Bureau of Economic Research.
    4. Rainer Lanz & Sébastien Miroudot, 2011. "Intra-Firm Trade: Patterns, Determinants and Policy Implications," OECD Trade Policy Papers 114, OECD Publishing.
    5. Peter B Kenen, 2011. "Currency internationalisation: an overview," BIS Papers chapters, in: Bank for International Settlements (ed.), Currency internationalisation: lessons from the global financial crisis and prospects for the future in Asia and the Pacific, volume 61, pages 9-18 Bank for International Settlements.
    6. Yung Chul Park, 2010. "RMB Internationalization and Its Implications for Financial and Monetary Cooperation in East Asia," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 18(2), pages 1-21.
    7. Kyungsoo Kim & Young Kyung Suh, 2011. "Dealing with the benefits and costs of internationalisation of the Korean won," BIS Papers chapters, in: Bank for International Settlements (ed.), Currency internationalisation: lessons from the global financial crisis and prospects for the future in Asia and the Pacific, volume 61, pages 151-171 Bank for International Settlements.
    8. Ganeshan Wignaraja, 2013. "Regional Trade Agreements and Enterprises in Southeast Asia," Microeconomics Working Papers 23718, East Asian Bureau of Economic Research.
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