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Hardcover | $40.00 Short | £27.95 | ISBN: 9780262013994 | 338 pp. | 7 x 9 in | 25 figures, 40 tables| April 2010
 

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Essential Info

Prospects for Monetary Cooperation and Integration in East Asia

Overview

East Asian countries were notably uninterested in regional monetary integration until the late 1990s, when the Asian financial crisis revealed the fragility of the region's exchange rate arrangements and highlighted the need for a stronger regional financial architecture. Since then, the countries of East Asia have begun taking steps to explore monetary and financial cooperation, establishing such initiatives as regular consultations among finance ministers and central bank governors and the pooling of foreign exchange reserves. In this book Ulrich Volz investigates the prospects for monetary cooperation and integration in East Asia, using state-of-the-art theoretical and empirical tools to analyze the most promising policy options.

Volz points out that monetary cooperation can be defined broadly to include options ranging from informal policy consultations to European-style monetary union. He recommends a gradual approach toward monetary integration in East Asia, one that pursues less extensive forms of monetary cooperation before tackling such highly challenging projects as a regional exchange rate system or a regional monetary union. The simpler, less demanding forms of policy coordination would, Volz argues, allow East Asian countries to develop an integrationist spirit and gain experience in cooperation. Monetary integration is not an end in itself, Volz reminds us, but a means to promote economic and financial development and create a stable macroeconomic environment that is conducive to investment and growth.

After providing an in-depth analysis of the costs and benefits of monetary integration, Volz examines different options for East Asian countries. He then proposes a strategy whereby countries first opt for a managed float of exchange rates guided by a regional currency basket into which an "Asian currency unit" is introduced as a virtual parallel currency to circulate alongside national currencies.

About the Author

Ulrich Volz is Senior Economist at the German Development Institute.

Table of Contents

  • Prospects for Monetary Cooperation and Integration in East Asia
  • Prospects for Monetary Cooperation and Integration in East Asia
  • Ulrich Volz
  • The MIT Press
  • Cambridge, Massachusetts
  • London, England
  • © 2010
  • Massachusetts Institute of Technology
  • All rights reserved. No part of this book may be reproduced in any form by any electronic or mechanical means (including photocopying, recording, or information storage and retrieval) without permission in writing from the publisher.
  • For information about special quantity discounts, please email special_sales@mitpress.mit.edu
  • This book was set in Times New Roman by Toppan Best-set Premedia Limited. Printed and bound in the United States of America.
  • Library of Congress Cataloging-in-Publication Data
  • Volz, Ulrich, 1977-
  • Prospects for monetary cooperation and integration in East Asia / Ulrich Volz.
  •  p. cm.
  • Includes bibliographical references and index.
  • ISBN 978-0-262-01399-4 (hardcover : alk. paper) 1. Monetary integration—East Asia. 2. East Asia— Economic integration. I. Title.
  • HG1270.5.V65 2010
  • 332.4′566095—dc22
  • 10 9 8 7 6 5 4 3 2 1
  • Contents
  • List of Abbreviations vii
  • Acknowledgments xi
  • Foreword by Koichi Hamada xv
  • 1 Introduction 1
  • I The Forces behind Monetary Cooperation and Integration 7
  • 2 The Instability of the International Monetary System and the Regionalization of Money 9
  • 3 The Asian Financial Crisis 21
  • 4 The Rise of China 41
  • II Costs and Benefits of Monetary Integration 47
  • 5 The Standard Approach: The Theory of Optimum Currency Areas 49
  • 6 A Reconsideration of Costs and Benefits 103
  • III Strategies for Monetary Integration in East Asia 141
  • 7 Current Monetary Arrangements in East Asia 143
  • 8 Exchange Rate Options for East Asia 157
  • 9 Inflation Targeting across the Region 161
  • 10 A Regional Exchange Rate System for East Asia? Lessons of the European Monetary System 167
  • 11 Basket Strategies for East Asia 187
  • 12 Reflections on Monetary Integration in East Asia: Past, Present, and Future 203
  • Notes 217
  • References 241
  • Annexes 267
  • Index 313
  • 1.2
  • 1.4
  • BooksChicago
  • Books Chicago
  • MITBooks
  • List of Abbreviations
  • List of Abbreviations
  • List of Abbreviations
  • ABF
  •  Asian Bond Fund
  • ABMI
  •  ASEAN+3 Asian Bond Market Initiative
  • ACU
  •  Asian currency unit
  • ADB
  •  Asian Development Bank
  • AEC
  •  ASEAN Economic Community
  • AFTA
  •  ASEAN Free Trade Area
  • AMF
  •  Asian Monetary Fund
  • ANCOM
  •  Andean Common Market
  • APEC
  •  Asia–Pacific Economic Cooperation Forum
  • ASA
  •  ASEAN Swap Arrangement
  • ASEAN
  •  Association of Southeast Asian Nations
  • ASEAN+3
  •  ASEAN with China, Japan, and Korea
  • ASEAN+4
  •  ASEAN+3 with Hong Kong
  • BIS
  •  Bank for International Settlements
  • BSAs
  •  Bilateral Swap Arrangements
  • c.i.f.
  •  Cost, insurance, and freight
  • CACM
  •  Central American Common Market
  • CeMCoA
  •  Center for Monetary Cooperation in Asia of the Bank of Japan
  • CIA
  •  Central Intelligence Agency
  • CIS
  •  Commonwealth of Independent States
  • CMI
  •  Chiang Mai Initiative
  • CNY
  •  Chinese yuan
  • CPI
  •  Consumer price inflation
  • DEY
  •  Currency basket consisting of the US dollar, the euro, and the Japanese yen
  • DTS
  •  Direction of Trade Statistics (IMF)
  • EAFTA
  •  East Asian Free Trade Area
  • EC
  •  European Community
  • ECB
  •  European Central Bank
  • ECOWAS
  •  Economic Community of West African States
  • ECU
  •  European currency unit
  • EEC
  •  European Economic Community
  • EMEAP
  •  Executives’ Meeting of East-Asia and Pacific Central Banks
  • EMS
  •  European Monetary System
  • EMU
  •  European Economic and Monetary Union
  • ERM
  •  Exchange rate mechanism
  • EU
  •  European Union
  • EUR
  •  Euro
  • ERPD
  •  ASEAN+3 Economic Review and Policy Dialogue
  • FDI
  •  Foreign direct investment
  • FTA
  •  Free trade agreement
  • G-3
  •  Group of three (United States, Japan, and euro area)
  • G-5
  •  Group of five (France, [West] Germany, Japan, United States, United Kingdom)
  • G-7
  •  Group of seven (G-5 plus Canada and Italy)
  • G-10
  •  Group of ten (G-7 plus Belgium, Netherlands, and Sweden)
  • G-20
  •  Group of twenty (Argentina, Australia, Brazil, Canada, China, European Union, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, Korea, Turkey, United Kingdom, United States)
  • GATT
  •  General Agreement on Tariffs and Trade
  • GDP
  •  Gross domestic product
  • GNI
  •  Gross national income
  • HK
  •  Hong Kong
  • HKD
  •  Hong Kong dollar
  • ICB
  •  Individual country basket
  • IDR
  •  Indonesian rupiah
  • IFS
  •  International Financial Statistics (published by the IMF)
  • ILO
  •  International Labor Organization
  • IMF
  •  International Monetary Fund
  • IOU
  •  “I owe you”
  • IP
  •  Industrial production
  • JPY
  •  Japanese yen
  • KRW
  •  Korean won
  • Mercosur
  •  Mercado Común del Sur
  • MYR
  •  Malaysian ringgit
  • NAFTA
  •  North American Free Trade Agreement
  • NCB
  •  National central bank
  • NEER
  •  Nominal effective exchange rate
  • OECD
  •  Organisation for Economic Cooperation and Development
  • OCA
  •  Optimum currency area
  • OLS
  •  Ordinary least squares
  • PBC
  •  People’s Bank of China
  • PHP
  •  Philippine peso
  • PPP
  •  Purchasing power parity
  • REER
  •  Real effective exchange rate
  • SADC
  •  Southern African Development Community
  • SD
  •  Standard deviation
  • SEACEN
  •  South East Asian Central Banks
  • SGD
  •  Singapore dollar
  • SGP
  •  Stability and Growth Pact
  • SITC
  •  Standard international trade classification
  • THB
  •  Thai baht
  • UNCTAD
  •  United Nations Conference on Trade and Development
  • UK
  •  United Kingdom
  • UN
  •  United Nations
  • USD
  •  United States dollar
  • US
  •  United States of America
  • USG
  •  US growth
  • VAR
  •  Vector autoregression
  • WAMU
  •  West African Monetary Union
  • WAMZ
  •  West African Monetary Zone
  • WDI
  •  World Development Indicators (published by the World Bank)
  • WEO
  •  World Economic Outlook database (published by the IMF)
  • WTO
  •  World Trade Organization

Endorsements

"This is one of most comprehensive studies available on monetary cooperation and integration in East Asia, and it can also be used as a very good handbook on the issue. Volz's opinions are balanced, and his book provides a clear road map for the reform of exchange rate arrangements in East Asia."
Yu Yongding, president of the China Society of World Economics, former director of the Institute of World Economics and Politics

"This is a very rich analysis of the prospects for monetary unification in East Asia. Ulrich Volz manages to blend economic theory, econometrics, and history to analyze the many dimensions of the process toward monetary integration in the most dynamic region of the world. Economists interested in the many issues relating to monetary unions will find a wealth of information in this book."
Paul De Grauwe, University of Leuven