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Asia Confronts the Impossible Trinity

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  • 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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    References listed on IDEAS

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    Cited by:

    1. Petar Vujanovic, 2011. "Understanding the Recent Surge in the Accumulation of International Reserves," OECD Economics Department Working Papers 866, OECD Publishing.
    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. Simplice A. Asongu & Jules R. Minkoua N., 2018. "Dynamic openness and finance in Africa," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 27(4), pages 409-430, May.
    4. Simplice A. Asongu, 2017. "The Comparative Economics of Knowledge Economy in Africa: Policy Benchmarks, Syndromes, and Implications," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 8(2), pages 596-637, June.
    5. Asongu, Simplice A., 2013. "Inequality, poverty and quality of institutions: which freedom channels of globalization matter for Africa?," European Economic Letters, European Economics Letters Group, vol. 2(1), pages 24-31.
    6. Peter J. Morgan, 2013. "Monetary Policy Frameworks in Asia : Experience, Lessons, and Issues," Macroeconomics Working Papers 23639, East Asian Bureau of Economic Research.
    7. Simplice Asongu, 2015. "Liberalisation and Financial Sector Competition: A Critical Contribution to the Empirics with an African Assessment," South African Journal of Economics, Economic Society of South Africa, vol. 83(3), pages 425-451, September.
    8. Michael Enowbi Batuo & Simplice A. Asongu, 2015. "The impact of liberalisation policies on income inequality in African countries," Journal of Economic Studies, Emerald Group Publishing, vol. 42(1), pages 68-100, January.
    9. Asongu, Simplice, 2015. "Financial development in Africa - a critical examination," MPRA Paper 82131, University Library of Munich, Germany.
    10. Ma, Guonan & McCauley, Robert N., 2013. "Is China or India more financially open?," Journal of International Money and Finance, Elsevier, vol. 39(C), pages 6-27.
    11. 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.
    12. 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.
    13. Simplice A Asongu, 2013. "How has politico-economic liberalization affected financial allocation efficiency? Fresh African evidence," Economics Bulletin, AccessEcon, vol. 33(1), pages 663-676.

    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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