Prospects for Monetary Cooperation and Integration in East Asia
338 pp., 7 x 9 in, 25 figures, 40 tables
- Published: April 23, 2010
- Published: April 23, 2010
An investigation into monetary cooperation in East Asia that examines options ranging from informal policy coordination to the introduction of a common currency.
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.
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
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