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Sequencing Trade and Monetary Integration

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  • Richard Pomfret

    (University of Adelaide, School of Economics)

Abstract

Regional integration for at least the last sixty years has focused on trade integration. Balassa’s canonical taxonomy of regional trading arrangements is often interpreted as a sequence from free trade area through customs union and common market to economic union. In the 1980s the concept of deep integration went beyond trade with its focus on policy harmonization, which came to include monetary integration, but it presupposed trade integration as the first step in the regional integration sequence. In Asia there has been very little trade integration through regional agreements - ASEAN is the most ambitious project, but even there actual achievements in trade integration have been limited. When discussion of monetary integration began in East Asia after 1997, it was in the absence of trade integration. The conventional view would see this as an obstacle to greater regional integration, but some proponents of Asian regionalism saw monetary integration as a step towards promoting trade integration, reversing the orthodox sequence. The two theoretical literatures (customs union theory and optimal currency area theory) were distinct and there remains a disconnect between the trade and monetary integration literature. This paper re- evaluates the global cross-country evidence on the relationship between trade integration and monetary union. It then applies the results to the prospects for monetary union before trade integration in East Asia, and to the consequences of monetary union for trade integration.

Suggested Citation

  • Richard Pomfret, 2005. "Sequencing Trade and Monetary Integration," Others 0502004, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpot:0502004
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    Cited by:

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    3. Tze-Haw Chan & Chee-Wooi Hooy & Ahmad Zubaidi Baharumshah, 2012. "A structural VARX modelling of international parities between China and Japan in the liberalization era," Economics Bulletin, AccessEcon, vol. 32(1), pages 730-736.
    4. Langhammer, Rolf J. & Schweickert, Rainer, 2006. "EU integration and its implications for Asian economies: What we know and what not," Kiel Working Papers 1264, Kiel Institute for the World Economy (IfW Kiel).
    5. Chan, Tze-Haw, 2012. "Assessing the international parity conditions and transmission mechanism for Malaysia-China," MPRA Paper 38930, University Library of Munich, Germany.
    6. Langhammer, Rolf J. & Schweickert, Rainer, 2006. "EU integration and its implications for Asian economies: What we do and do not know," Journal of Asian Economics, Elsevier, vol. 17(3), pages 395-416, June.
    7. Richard Pomfret, 2005. "Regional Trade Agreements," International Trade 0511002, University Library of Munich, Germany.
    8. Sven W. Arndt, 2008. "Production Networks And The Open Macroeconomy," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 53(03), pages 509-521.
    9. Richard Pomfret, 2009. "Regionalism in the Asia-Pacific Region: How Wide, How Deep?," School of Economics and Public Policy Working Papers 2009-31, University of Adelaide, School of Economics and Public Policy.
    10. Maria A. Bultseva & Nadezhda M. Lebedeva, 2018. "The Role Of Individual Values And Motivation In Creative Behavior In Micro-Domains Of Literary Creativity: Prose And Poetry Writing," HSE Working papers WP BRP 100/PSY/2018, National Research University Higher School of Economics.
    11. Pui Sun Tam, 2018. "Economic Transition and Growth Dynamics in Asia: Harmony or Discord?," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 60(3), pages 361-387, September.
    12. Richard Pomfret, 2005. "Currency Areas in Theory and Practice," The Economic Record, The Economic Society of Australia, vol. 81(253), pages 166-176, June.
    13. Pomfret, Richard & Sourdin, Patricia, 2009. "Have Asian trade agreements reduced trade costs?," Journal of Asian Economics, Elsevier, vol. 20(3), pages 255-268, May.
    14. Chan, Tze-Haw, 2011. "A structural modeling of exchange rate, prices and interest rates between Malaysia-China in the liberalization era," MPRA Paper 32955, University Library of Munich, Germany.
    15. Priscilla Swartz, 2006. "Global Versus Regional Systematic Risk and International Asset Allocations in Asia," Annals of Economics and Finance, Society for AEF, vol. 7(1), pages 77-89, May.
    16. Cavoli, Tony, 2012. "Exploring dimensions of regional economic integration in East Asia: More than the sum of its parts?," Journal of Asian Economics, Elsevier, vol. 23(6), pages 643-653.
    17. Richard Pomfret, 2007. "Is Regionalism an Increasing Feature of the World Economy?," The World Economy, Wiley Blackwell, vol. 30(6), pages 923-947, June.
    18. Ito, Hiro, 2006. "Financial development and financial liberalization in Asia: Thresholds, institutions and the sequence of liberalization," The North American Journal of Economics and Finance, Elsevier, vol. 17(3), pages 303-327, December.
    19. Genberg, Hans & Siklos, Pierre L., 2010. "Revisiting the shocking aspects of Asian monetary unification," Journal of Asian Economics, Elsevier, vol. 21(5), pages 445-455, October.
    20. Malgorzata Jakubiak & Anna Kolesnichenko & Wojciech Paczynski & John Roberts & Sinan Ülgen, 2007. "The New EU Frontier: Perspectives on Enhanced Economic Integration," CASE Network Reports 0071, CASE-Center for Social and Economic Research.
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    More about this item

    Keywords

    currency union; customs union;

    JEL classification:

    • F02 - International Economics - - General - - - International Economic Order and Integration
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions

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