Handbooks of Research on International Political Economy series
Edited by Thomas Oatley and W. Kindred Winecoff
Chapter 13: The political economy of exchange rates in East Asia
The global financial crisis of 2007-2008 has generated a great deal of interest in East Asian (including Northeast Asian and Southeast Asian) exchange rates. Pundits and politicians in the West have blamed China and other East Asian economies as culprits in the global imbalance that led to the financial crisis, pointing their fingers at the region's export-driven development model and large current account surpluses (e.g., Krugman 2009, 2010). Especially with regard to China, the demand to end its manipulation of the exchange rates has grown stronger than ever before. Meanwhile, both inside and outside East Asia, there has been much discussion on the lessons of the global financial crisis for the region, especially the benefits of regional cooperation to achieve some degree of insulation and protection from international financial turmoil and policy pressure from the West (Kirshner 2005; Beeson and Islam 2005). In this chapter, I examine three related topics of East Asian exchange rates: (1) the evolution of exchange rate policies of the major countries in the region; (2) the development of regional financial and monetary cooperation; and (3) the implications of East Asian regionalism for global financial governance. I will focus on discussing the political sources and consequences of these monetary phenomena, drawing from a wide range of literature on these topics and pointing out ways in which future research can enhance our knowledge and understanding of these issues.
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