Coping with a New Monetary Order after the Global Crisis
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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