A Comprehensive Introduction to Regional Issues
Edited by Masahisa Fujita, Ikuo Kuroiwa and Satoru Kumagai
10. Monetary integration in East Asia Eiji Ogawa and Kentaro Kawasaki 10.1 INTRODUCTION This chapter examines the costs and benefits of monetary integration as well as theories and empirical studies on Optimum Currency Areas (OCAs). It also takes a look at the lessons learned from the Asian currency crisis of 1997 with regard to monetary integration and the necessary steps for creating a currency union. To date, no such monetary integration plans have been implemented in East Asia, although it is a topic that some scholars have discussed. Considering that, this chapter outlines how monetary integration could be realized in East Asia in a future state rather than in its current incarnation. Proposals here will contribute to possible monetary integration in East Asia in a similar fashion to how the introduction of the euro was based on the active discussion of proposals regarding monetary integration in Europe. It is very useful to study costs and benefits for East Asian economies in the current economic situation where there is integration in terms of trade, production, and finance, even if a currency union in East Asia may be only a dream at present. It is important to note that there was no regional monetary and financial cooperation in East Asia before the crisis. After the crisis, the Chiang Mai Initiative (CMI) was launched, along with the Asian Bond Market Initiative (ABMI) and the Asian Bond Fund (ABF) initiative, and consequently regional cooperation has begun to develop. This momentum may lead to the...
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