Towards Monetary and Financial Integration in East Asia

9781848443631 Edward Elgar Publishing

Edited by Koichi Hamada, Tuntex Professor of Economics, Yale University, New Haven, US, Beate Reszat, Economist, Hamburg Ministry of Science and Research, Germany and Ulrich Volz, Senior Lecturer in Economics, SOAS, University of London, UK and Senior Research Fellow, German Development Institute / Deutsches Institut für Entwicklungspolitik (DIE)

Publication Date: 2009 ISBN: 978 1 84844 363 1 Extent: 424 pp

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This indispensable book provides a comprehensive analysis of monetary and financial integration in East Asia. It assesses the steps already taken toward financial integration and brings forward different proposals for future exchange rate arrangements in what has now become the world’s most dynamic region.

With contributions from distinguished experts this timely book evaluates the economic and politico-economic arguments and conditions for monetary and financial integration in East Asia. It explores how and to what extent the countries of the region can integrate despite their heterogeneity and their underlying political tensions. Drawing on the European experiences, this book analyzes the economic logic of monetary and financial integration in East Asia and its political feasibility.

This invaluable broad analysis will be of interest to academic researchers, students, policy-makers and professional economists working on matters of international economic cooperation, common currency areas, international open economy macroeconomics, and East Asian integration.

Critical Acclaim

‘Towards Monetary and Financial Integration in East Asia is an important book. East Asia, led by China, has been and will continue to be the largest, most rapidly growing region in the world. Major global imbalances persist, with East Asia in large surplus. Yet East Asian financial and monetary integration is only in the early stages of what will necessarily be a long-run process. These 14 essays by different authors address, in six Parts, fundamental long-run issues and prospects. These include the development of a regional financial architecture, liquidity provision and crisis management, surveillance mechanisms, exchange rate arrangements, currency baskets, an Asian Currency Unit, and ultimately even a single currency. The implications of the rise of China and the role of Japan underlie much of these analyses. However imperfect, the EU is the dominant relevant experience for East Asian financial and monetary integration. It is important to understand, as the authors do, that it took 47 years from the EU’s nascent founding to the establishment of the euro, and that economic integration has preceded political integration. This book importantly addresses such basic issues in this time frame and with an appreciation of the political economy difficulties of financial integration.’
– Hugh Patrick, Columbia University, US

‘The book edited by Professors Hamada, Reszat, and Volz gives a comprehensive overview of the current status and challenges of economic integration in East Asia. Monetary and financial integration in East Asia has proceeded gradually but steadily since the Asian financial crisis of 1997–98. The book is an authoritative cutting-edge collection of papers in respective topics which brings the reader to the frontier of the literature.’
– Takatoshi Ito, University of Tokyo, Japan

Contributors

Contributors: W.H. Branson, Y.-W. Cheung, M.D. Chinn, R.W. Click, R.N. Cooper, M.P. Dooley, D. Folkerts-Landau, E. Fujii, P. Garber, K. Hamada, C.N. Healy, M. Kawai, H. Kim, I. Lee, Y. Liang, G. Ma, R. McKinnon, E. Ogawa, M.G. Plummer, E. Remolona, B. Reszat, G. Schnabl, J. Shimizu, U. Volz, J. Williamson, J. Zhang

Contents

Contents:

Foreword
Richard N. Cooper

Introduction: Prospects for Monetary and Financial Integration in East Asia – Dreams and Dilemmas
Koichi Hamada, Beate Reszat and Ulrich Volz

PART I: THE POLITICAL ECONOMY OF REGIONAL INTEGRATION
1. The ASEAN Economic Community and the European Experience
Michael G. Plummer and Reid W. Click

2. The Political Economy of European Economic and Monetary Union Negotiations and Implications for East Asia
Heungchong Kim

3. International Political Conflicts and Economic Integration
Koichi Hamada and Inpyo Lee

PART II: DEVELOPING BOND MARKETS IN EAST ASIA
4. Learning by Doing in Market Reform: Lessons from a Regional Bond Fund
Guonan Ma and Eli Remolona

5. Currency Denomination in Asian Bond Markets
Eiji Ogawa and Junko Shimizu

PART III: EXCHANGE RATE POLICIES IN EAST ASIA: THE ROLE OF THE DOLLAR
6. East Asia’s Role in the Revived Bretton Woods System
Michael P. Dooley, David Folkerts-Landau and Peter Garber

7. Current Account Surpluses and Conflicted Virtue in East Asia: China and Japan under the Dollar Standard
Ronald McKinnon and Gunther Schnabl

PART IV: TOWARD MONETARY INTEGRATION IN EAST ASIA?
8. Three Cases for Monetary Integration in East Asia
Ulrich Volz

9. Monetary and Exchange Rate Policy Coordination in ASEAN+1
William H. Branson and Conor N. Healy

PART V: CURRENCY BASKETS FOR EAST ASIA?
10. Capital Markets and Exchange Rate Stabilization in East Asia: Diversifying Risk Based on Currency Baskets
Gunther Schnabl

11. Asian Currency Baskets
John Williamson

12. The Role of an Asian Currency Unit
Masahiro Kawai

PART VI: THE ROLE OF CHINA
13. The Illusion of Precision and the Role of the Renminbi in Regional Integration
Yin-Wong Cheung, Menzie D. Chinn and Eiji Fujii

14. Institutional and Structural Problems of China’s Foreign Exchange Market and the RMB’s Role in East Asia
Zhang Jikang and Liang Yuanyuan

Index