Asian Monetary Integration

Asian Monetary Integration

Coping with a New Monetary Order after the Global Crisis

Woosik Moon and Yeongseop Rhee

The authors examine the history, conditions and current efforts towards monetary integration in Asia and explore possible future paths, highlighting the roles and perspectives of East Asian countries in the integration process. They consider how East Asian economies could establish their own zone of monetary stability, and show that this stability cannot be separately addressed from the issues of economic growth and solidarity. Against this backdrop, the book tackles the issues of East Asian monetary integration underpinned by the broad framework of economic growth and solidarity.

Chapter 5: Conditions for monetary integration in East Asia

Woosik Moon and Yeongseop Rhee

Subjects: asian studies, asian economics, asian politics and policy, economics and finance, asian economics, international economics, money and banking, politics and public policy, asian politics

Extract

With an increasing need for monetary integration in the region, there have been many studies on its feasibility. The general conclusion is that East Asian monetary integration would be very difficult to realize. Some studies even say that integration is not desirable. This is due to the fact that East Asia is neither economically self- contained nor an optimum currency area, and that East Asian governments have policy objectives that are too different from each other. However, this kind of argument is mostly based on past analyses. As we saw in Chapter 4, East Asia is rapidly changing and the region’s readiness for a monetary arrangement has changed accordingly. Now, economic interdependence among East Asian countries has become so deep that closer regional cooperation is essential. If economic integration merely means an absence of any barriers to the free flow of goods, capital and people, countries in East Asia might have already attained quite a signifi cant degree of market- driven integration. Some groups of countries already satisfy the preconditions for a currency union. As Watanabe and Ogura (2006) pointed out, ‘some Asian countries exhibit almost the same level of external openness, intra- regional trade and symmetry in macroeconomic shocks as their European counterparts did in the pre- euro period’ (p.3). More importantly, if the endogeneity of the optimum currency area works, then East Asian countries may be suitable for a currency union, although those preconditions are not yet fulfilled and countries do not meet many of these conditions ex ante. In sum, on economic grounds there seem to be good reasons to promote East Asian monetary integration, in whatever form it may be.

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