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Asia Confronts the Impossible Trinity

Author

Listed:
  • Patnaik, Ila

    (Asian Development Bank Institute)

  • Shah, Ajay

    (Asian Development Bank Institute)

Abstract

In this paper, we examine capital account openness and exchange rate flexibility in 11 Asian economies. Asia has made slow progress in de jure capital account openness, but has made much more progress in de facto capital account openness. While there has been a gradual increase in exchange rate flexibility, most Asian economies continue to have largely inflexible exchange rates. This combination of advancing de facto capital account integration without greater exchange rate flexibility has led to procyclical monetary policy, when capital flows are procyclical. This paper emphasises the need for a consistent monetary policy framework.

Suggested Citation

  • Patnaik, Ila & Shah, Ajay, 2010. "Asia Confronts the Impossible Trinity," ADBI Working Papers 204, Asian Development Bank Institute.
  • Handle: RePEc:ris:adbiwp:0204
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    File URL: http://www.adbi.org/working-paper/2010/03/12/3636.asia.confronts.impossible.trinity/
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    References listed on IDEAS

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    Citations

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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. Boubakri, Salem & Guillaumin, Cyriac, 2015. "Regional integration of the East Asian stock markets: An empirical assessment," Journal of International Money and Finance, Elsevier, vol. 57(C), pages 136-160.
    3. 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.

    More about this item

    Keywords

    capital account openness; exchange rate flexibility; asian economies;

    JEL classification:

    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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