IDEAS home Printed from https://ideas.repec.org/a/ris/integr/0580.html
   My bibliography  Save this article

Why Is Open Regionalism Not Always Good?

Author

Listed:
  • Loke, Wai-Heng

    () (University of Nottingham Ningbo China)

  • Winters, L. Alan

    () (University of Sussex)

Abstract

When the Asia Pacific Economic Cooperation (APEC) formally adopted the principle of “open regionalism” (OR) in its trade liberalization in 1991, many were optimistic that this approach suggested the bloc as a stepping stone toward global free trade. This optimistic view was reinforced by the economic theorizing of Sang-Seung Yi (1996). This paper shows formally via a simple model why OR may fail. We unpick Yi (1996) systematically and explain that OR works in his model because of quasilinear preferences and Ricardian technology assumptions. Once these assumptions are replaced with constant lasticity of substitution (CES) preferences and increasing marginal costs, OR fails to ensure global free trade as an equilibrium when the world consists of a country that is sufficiently larger than the rest of the world.

Suggested Citation

  • Loke, Wai-Heng & Winters, L. Alan, 2012. "Why Is Open Regionalism Not Always Good?," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 27, pages 437-465.
  • Handle: RePEc:ris:integr:0580
    as

    Download full text from publisher

    File URL: http://sejong.metapress.com/
    File Function: Full text
    Download Restriction: no

    References listed on IDEAS

    as
    1. Black, Stanley W., 1991. "Transactions costs and vehicle currencies," Journal of International Money and Finance, Elsevier, vol. 10(4), pages 512-526, December.
    2. Takatoshi ITO, 2010. "China as Number One: How about the Renminbi?," Asian Economic Policy Review, Japan Center for Economic Research, vol. 5(2), pages 249-276, December.
    3. Schenk,Catherine R., 2013. "The Decline of Sterling," Cambridge Books, Cambridge University Press, number 9781107612990, December.
    4. Xiaoli Chen & Yin‐Wong Cheung, 2011. "Renminbi Going Global," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 19(2), pages 1-18, March.
    5. 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.
    6. Linda S. Goldberg, 2010. "Is the international role of the dollar changing?," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 16(Jan).
    7. Dobson, Wendy & Masson, Paul R., 2009. "Will the renminbi become a world currency?," China Economic Review, Elsevier, vol. 20(1), pages 124-135, March.
    8. Arvind Subramanian, 2011. "Renminbi Rules: The Conditional Imminence of the Reserve Currency Transition," Working Paper Series WP11-14, Peterson Institute for International Economics.
    9. Dominguez, Kathryn M & Frankel, Jeffrey A, 1993. "Does Foreign-Exchange Intervention Matter? The Portfolio Effect," American Economic Review, American Economic Association, vol. 83(5), pages 1356-1369, December.
    10. Kenneth Rogoff, 1998. "Blessing or curse? Foreign and underground demand for euro notes," Economic Policy, CEPR;CES;MSH, vol. 13(26), pages 261-303, April.
    11. Black, Stanley W., 1985. "International money and international monetary arrangements," Handbook of International Economics,in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 2, chapter 22, pages 1153-1193 Elsevier.
    12. Hans Genberg, 2011. "Currency internationalisation: analytical and policy issues," 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 221-230 Bank for International Settlements.
    13. Barry, Eichengreen, 2011. "The renminbi as an international currency," Journal of Policy Modeling, Elsevier, vol. 33(5), pages 723-730, September.
    14. Yin‐Wong Cheung & Guonan Ma & Robert N. McCauley, 2011. "Renminbising China'S Foreign Assets," Pacific Economic Review, Wiley Blackwell, vol. 16(1), pages 1-17, February.
    15. Arvind Subramanian, 2011. "Eclipse: Living in the Shadow of China's Economic Dominance," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 6062.
    16. Barry Eichengreen, 2005. "Sterling's Past, Dollar's Future: Historical Perspectives on Reserve Currency Competition," NBER Working Papers 11336, National Bureau of Economic Research, Inc.
    17. McKinnon, Ronald I., 1979. "Money in International Exchange: The Convertible Currency System," OUP Catalogue, Oxford University Press, number 9780195024098.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Regional Integration; Equilibrium Coalition Structure; Welfare;

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F15 - International Economics - - Trade - - - Economic Integration

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ris:integr:0580. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jong-Eun Lee). General contact details of provider: http://edirc.repec.org/data/desejkr.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.