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Use of National Currencies for Trade Settlement in East Asia: A Proposal

Author

Listed:
  • Lee, Il Houng

    (Asian Development Bank Institute)

  • Park, Yung Chul

    (Asian Development Bank Institute)

Abstract

This paper develops a multilateral currency system where national currencies are used for trade settlement in East Asia, comprising the Association of Southeast Asian Nations (ASEAN) member countries, the People’s Republic of China, Japan, and the Republic of Korea (ASEAN+3). The currency scheme is expected to mitigate the risks associated with independent attempts at internationalization in non-convertible currency countries. It could also reduce dependence on the US dollar, safeguard against financial spillovers from outside, and deepen trade and financial integration in the region. The patterns and structure of trade and financial openness suggest that East Asia has already established an economic base upon which it could launch such a system. The experience with renminbi internationalization will help the Republic of Korea and ASEAN-5 to emulate this strategy.

Suggested Citation

  • Lee, Il Houng & Park, Yung Chul, 2014. "Use of National Currencies for Trade Settlement in East Asia: A Proposal," ADBI Working Papers 474, Asian Development Bank Institute.
  • Handle: RePEc:ris:adbiwp:0474
    as

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    File URL: http://www.adbi.org/files/2014.04.11.wp474.currencies.trade.east.asia.pdf
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    References listed on IDEAS

    as
    1. Shinji Takagi, 2011. "Internationalising the yen, 1984-2003: unfinished agenda or mission impossible?," BIS Papers chapters,in: Bank for International Settlements (ed.), Currency internationalisation: lessons from the global financial crisis and prospects for the future in Asia and the Pacific, volume 61, pages 75-92 Bank for International Settlements.
    2. Wignaraja, Ganeshan, 2013. "Regional Trade Agreements and Enterprises in Southeast Asia," ADBI Working Papers 442, Asian Development Bank Institute.
    3. Asian Development Bank (ADB), 2013. "The Road to ASEAN Financial Integration: A Combined Study on Assessing the Financial Landscape and Formulating Milestones for Monetary and Financial Integration in ASEAN," ADB Reports RPT124444, Asian Development Bank (ADB), revised 15 May 2013.
    4. Yung Chul Park, 2010. "RMB Internationalization and Its Implications for Financial and Monetary Cooperation in East Asia," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 18(2), pages 1-21.
    5. Rainer Lanz & Sébastien Miroudot, 2011. "Intra-Firm Trade: Patterns, Determinants and Policy Implications," OECD Trade Policy Papers 114, OECD Publishing.
    6. Kyungsoo Kim & Young Kyung Suh, 2011. "Dealing with the benefits and costs of internationalisation of the Korean won," BIS Papers chapters,in: Bank for International Settlements (ed.), Currency internationalisation: lessons from the global financial crisis and prospects for the future in Asia and the Pacific, volume 61, pages 151-171 Bank for International Settlements.
    7. Peter B Kenen, 2011. "Currency internationalisation: an overview," BIS Papers chapters,in: Bank for International Settlements (ed.), Currency internationalisation: lessons from the global financial crisis and prospects for the future in Asia and the Pacific, volume 61, pages 9-18 Bank for International Settlements.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    currency internationalization; RMB internationalization; trade invoicing and settlement;

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission

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