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Exchange-Rate Arrangements an Financial Integration in East Asia: On a Collision Course?

  • Hans Genberg

    (Executive Director (Research), Hong Kong Monetary Authority)

Registered author(s):

    Financial integration in Ease Asia is actively being pursued and will in due course lead to substantial mobility of capital between economies in the region. Plans for monetary cooperation as a prelude to monetary integration and ultimately monetary unification are also proposed. These plans often suggest that central banks should adopt some form of common exchange rate policy in the transition period towards full monetary union. This paper argues that this is a dangerous path in the context of highly integrated financial markets. An alternative approach is proposed where independent central banks coordinate their monetary policies through the adoption of common objectives and by building an appropriate institutional framework. When this coordination process has progressed to the point where interest rate developments are similar across the region, and if in the meantime the required institutional infrastructure has been build, the next step towards monetary unification can be taken among those central banks that so desire. The claim is that this transition path is likely to be robust and will limit the risk of currency crises.

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    File URL: https://www.oenb.at/dam/jcr:3b528ba1-689b-4557-b7e2-989982b96c2f/wp122_tcm16-42283.pdf
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    Paper provided by Oesterreichische Nationalbank (Austrian Central Bank) in its series Working Papers with number 122.

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    Length: 50
    Date of creation: 05 May 2006
    Handle: RePEc:onb:oenbwp:122
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    1. Maria Teresa VALDERRAMA & Sylvia KAUFMANN, . "Modeling Credit Aggregates," EcoMod2004 330600146, EcoMod.
    2. Eiji Ogawa & Junko Shimizu, 2005. "A Deviation Measurement for Coordinated Exchange Rate Policies in East Asia," Discussion papers 05017, Research Institute of Economy, Trade and Industry (RIETI).
    3. Martin Schneider & Martin Spitzer, 2004. "Forecasting Austrian GDP using the generalized dynamic factor model," Working Papers 89, Oesterreichische Nationalbank (Austrian Central Bank).
    4. Jesus Crespo Cuaresma & Ernest Gnan & Doris Ritzberger-Grünwald, 2003. "Searching for the Natural Rate of Interest: a Euro-Area Perspective," Working Papers 84, Oesterreichische Nationalbank (Austrian Central Bank).
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