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Distribution, Domestic Politics, and Monetary Cooperation in East Asia


  • Natasha Hamilton-Hart

    (Asian Development Bank Institute (ADBI))


Since the financial crises of 1997, East Asia has made modest but nonetheless significant steps towards greater regional integration and cooperation in the areas of finance and trade, accompanied by progress on institution-building at the regional level. Monetary cooperation, however, has not proceeded to anything like even the modest levels registered for other functional areas of cooperation. This paper investigates this discrepancy. It asks whether monetary cooperation is simply an unattractive proposition because it promises fewer net gains than cooperation on other issues, or whether there are other explanations for the absence of monetary cooperation in the region. Based on a review of estimates of the aggregate economic gains and losses arising from monetary cooperation, the paper argues that there is a prima facie puzzle to be explained : monetary cooperation does hold out the prospect of real gains and, although these gains are not cost-free, neither is the status quo. The paper then turns to the domestic level of the major East Asian countries, in order to assess the relative strength of the domestic economic interests that are likely to be either advocates or opponents of monetary cooperation. It shows that domestic distributional politics—the processes by which gains and losses within countries are distributed—are a plausible reason for the low priority placed on regional monetary cooperation to date. International-level political concerns and the potential supply of institutional solutions to collective action problems are additional reasons for the lack of monetary cooperation, but the domestic demand for such cooperation is analytically prior to these more conventional explanations for the lack of cooperation in East Asia.

Suggested Citation

  • Natasha Hamilton-Hart, 2011. "Distribution, Domestic Politics, and Monetary Cooperation in East Asia," Finance Working Papers 23204, East Asian Bureau of Economic Research.
  • Handle: RePEc:eab:financ:23204

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    References listed on IDEAS

    1. Michael P. Dooley & David Folkerts-Landau & Peter Garber, 2004. "The revived Bretton Woods system," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 9(4), pages 307-313.
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    6. W. Max Corden, 2011. "Global Imbalances and the Paradox of Thrift," Melbourne Institute Working Paper Series wp2011n20, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
    7. Michael P. Dooley & David Folkerts-Landau & Peter Garber, 2004. "The Revived Bretton Woods System: The Effects of Periphery Intervention and Reserve Management on Interest Rates & Exchange Rates in Center Countries," NBER Working Papers 10332, National Bureau of Economic Research, Inc.
    8. Andrew Hughes Hallett & Juan Martinez Oliva, 2012. "Reducing Global Imbalances: Can Fixed Exchange Rates and Current Account Limits Help?," Open Economies Review, Springer, vol. 23(1), pages 163-192, February.
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    More about this item


    Regional Integration; regional cooperation; Monetary cooperation;

    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • F3 - International Economics - - International Finance
    • F5 - International Economics - - International Relations, National Security, and International Political Economy

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