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Prospects for Monetary Cooperation in East Asia

  • Park, Yung Chul

    (Asian Development Bank Institute)

  • Song, Chi-Young

    (Asian Development Bank Institute)

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    The purpose of this paper is to reexamine the exchange rate policy of the Republic of Korea, and its role in promoting financial and monetary cooperation in East Asia in the wake of the 2008 global financial crisis. The Republic of Korea would not actively participate in any discussion of establishing a regional monetary and exchange rate arrangement as it is expected to maintain a weakly managed floating regime. The People’s Republic of China (PRC) has been fostering the yuan as an international currency, which will lay the groundwork for forming a yuan area among the PRC; the Association of Southeast Asian Nations (ASEAN); Hong Kong, the PRC; and Taipei,China. Japan has shown less interest in assuming a greater role in East Asia’s economic integration due to deflation, a strong yen, slow growth, and political instability. Japan would not eschew free floating. These recent developments demand a new modality of monetary cooperation among the Republic of Korea, Japan, and the PRC. Otherwise, ASEAN+3 will lose its rationale for steering regional economic integration in East Asia.

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    Paper provided by Asian Development Bank Institute in its series ADBI Working Papers with number 314.

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    Length: 27 pages
    Date of creation: 23 Oct 2011
    Date of revision:
    Handle: RePEc:ris:adbiwp:0314
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    1. Jonathan David Ostry & Atish R. Ghosh & Karl Friedrich Habermeier & Luc Laeven & Marcos Chamon & Mahvash Saeed Qureshi & Annamaria Kokenyne, 2011. "Managing Capital Inflows: What Tools to Use?," IMF Staff Discussion Notes 11/06, International Monetary Fund.
    2. Prema-chandra Athukorala & Jayant Menon, 2010. "Global Production Sharing, Trade Patterns and Determinants of Trade Flows," Departmental Working Papers 2010-06, The Australian National University, Arndt-Corden Department of Economics.
    3. Athukorala, Prema–Chandra & Menon, Jayant, 2010. "Global Production Sharing, Trade Patterns, and Determinants of Trade Flows in East Asia," Working Papers on Regional Economic Integration 41, Asian Development Bank.
    4. Bayoumi, Tamim & Eichengreen, Barry, 1998. "Exchange rate volatility and intervention: implications of the theory of optimum currency areas," Journal of International Economics, Elsevier, vol. 45(2), pages 191-209, August.
    5. Margarida Duarte & Alan C. Stockman, 2001. "Rational Speculation and Exchange Rates," NBER Working Papers 8362, National Bureau of Economic Research, Inc.
    6. Annamaria Kokenyne & Romain Veyrune & Karl Friedrich Habermeier & Harald Anderson, 2009. "Revised System for the Classification of Exchange Rate Arrangements," IMF Working Papers 09/211, International Monetary Fund.
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