Table of Contents

Regional Currency Areas in Financial Globalization

Regional Currency Areas in Financial Globalization

Edited by Patrick Artus, André Cartapanis and Florence Legros

This book is an up-to-date, authoritative and comprehensive analysis of the key issues and challenges facing regional currency area projects in the context of financial globalization. The authors focus on several central issues that emerged during the experiences of the 1990s and 2000s: exchange rate regimes and optimal currency area theory; exchange rate regimes in emerging countries, international capital markets and regional currency areas; EMU and the euro; exchange rate regimes in Central and Eastern Europe, Asia and Latin America; dollarization and the coordination of macroeconomic policies in the presence of regional currency areas.

Chapter 2: Currency Regimes and Process of Regional Financial Integration of the Emerging Countries

Daniel Goyeau, Jacques Léonard and Dominique Pépin

Subjects: economics and finance, international economics, money and banking


2. Currency regimes and the process of regional financial integration of the emerging countries Daniel Goyeau, Jacques Léonard and Dominique Pépin INTRODUCTION Vis-à-vis the rising interdependency of Western financial markets, reducing a priori the potential profits of diversification of international portfolios, the development of emerging financial markets since the very beginning of the 1990s has been generally regarded as likely to offer new opportunities. In this context, it has become traditional to structure the search for yield opportunities and the associated investments according to a logic with large geographical spread.1 Asia, Latin America, CEECs, the Middle East. This geographical logic of diversification never truly takes account of the heterogeneity of each of these regions, a heterogeneity which obviously concerns real factors (level of development, type of specialization, degree of opening) but also monetary factors, where exchange rate and convertibility regimes are the structuring elements. Geographical logic consists in arbitrating large areas between one another, and would, for that reason, lead to financial integration of emerging markets, therefore with the realization of the law of single international price of risk (Goyeau et al., 1999). However such a realization requires a double continuous adjustment: that of the foreign exchange market on the one hand, that of financial markets on the other. Also, when one is more particularly interested in the methods of diversification with respect to assets in emerging countries, one can a priori doubt the realization of the law of single price of...

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