Toward an East Asian Exchange Rate Regime

Toward an East Asian Exchange Rate Regime

DUCK-KOO CHUNG
BARRY EICHENGREEN
Copyright Date: 2007
Pages: 164
https://www.jstor.org/stable/10.7864/j.ctt127zw1
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    Toward an East Asian Exchange Rate Regime
    Book Description:

    East Asian exchange rates have become a global flashpoint. U.S. policymakers blame artificially low Asian currency values for global imbalances, including America's ballooning current account deficit. The solution, they argue, lies in some combination of greater exchange rate flexibility and the appreciation of Asian currencies against the dollar. Asian officials recognize the need to let their exchange rates rise, but they fear that would hamper growth and cut sharply into the value of their dollar reserves.

    Toward an East Asian Exchange Rate Regimeoffers a timely and comprehensive analysis of the resulting debates, drawing on expertise from China, Japan, South Korea, and the United States. The introduction reviews the issues at stake, sketches a variety of proposed exchange rate regimes, and discusses comparisons between East Asia and the West.

    Subsequent chapters examine the connection between global financial imbalances and East Asian monetary cooperation, China's potential role in regional coordination, the relationship between monetary and trade integration, and different paths toward regional cooperation. Authoritative yet concise, this is an essential primer on East Asian monetary integration.

    Contributors include Gongpil Choi (Korean Institute of Finance, Federal Reserve Bank of San Francisco), Masahiro Kawai (University of Tokyo, Asian Development Bank), Kwanho Shin (Korea University), Yunjong Wang (SK Institute), Masaru Yoshitomi (RIETI,Tokyo), and Yongding Yu (Chinese Academy of Social Sciences).

    eISBN: 978-0-8157-1418-7
    Subjects: Business, Economics

Table of Contents

  1. Front Matter
    (pp. i-iv)
  2. Table of Contents
    (pp. v-vi)
  3. Preface
    (pp. vii-x)
    DUCK-KOO CHUNG and BARRY EICHENGREEN
  4. 1 Exchange Rate Arrangements for Emerging East Asia
    (pp. 1-21)
    DUCK-KOO CHUNG and BARRY EICHENGREEN

    What to do about exchange rate arrangements is high on the policy agenda of emerging East Asia.¹ For decades, export-led growth has been integral to national development strategies in countries like South Korea and Taiwan. More recently, other countries, China and Vietnam among them, have adopted this same approach to initiating and sustaining economic growth. An exchange rate that is stable and competitively valued has been seen as necessary for penetrating foreign markets and successfully implementing this strategy.² This is the lesson drawn from Japan’s high growth era, when the yen was pegged to the dollar for more than two...

  5. 2 Global Imbalances and East Asian Monetary Cooperation
    (pp. 22-48)
    MASARU YOSHITOMI

    At the dawn of the new millennium, East Asia is confronted by both challenges and opportunities.¹ Among the challenges is identifying what role the region should play in resolving the current pattern of global imbalances characterized by both the huge current account deficit of the United States and the vast accumulation of foreign reserves by Asian monetary authorities. Among the opportunities is the chance to use the problem of global imbalances as an occasion to facilitate the closer coordination of monetary and exchange rate policies and design a set of institutions suited to this task.

    This chapter explains how these...

  6. 3 Toward East Asian Monetary and Financial Cooperation: A Chinese Perspective
    (pp. 49-66)
    YONGDING YU

    The asian crisis of 1997–98 was no simple matter. Ten years after the fact, the consensus view is that it reflected a combination of domestic and international factors.¹ Domestically, the long-standing practice by governments of enlisting the banking system as an instrument of their industrial policies created vulnerabilities on bank balance sheets. Banks that regarded themselves as too big and politically well connected to fail levered up their bets, creating contingent liabilities for the public sector. Weaknesses in corporate governance allowed firms to borrow excessively, while the maintenance of pegged exchange rates encouraged them to leave their liabilities unhedged....

  7. 4 The Linkage between Trade Agreements and Monetary Cooperation
    (pp. 67-89)
    KWANHO SHIN and YUNJONG WANG

    Economic integration is high on the policy agenda in East Asia. One way of proceeding would be to focus on intraregional trade and investment and attempt to foster their further expansion through the negotiation of free trade agreements (FTAs) and investment arrangements. Another, conceivably complementary, approach would be to focus on monetary integration and to seek to develop a regional currency arrangement leading ultimately to an East Asian monetary union. It is not obvious which strategy would be most productive.

    In a previous article we questioned whether trade integration is a necessary precursor to monetary integration.¹ We argued that trade...

  8. 5 Dollar, Yen, or Renminbi Bloc?
    (pp. 90-120)
    MASAHIRO KAWAI

    The international monetary system in the post–World War II era underwent a dramatic transformation with the Nixon shock of August 1971, which suspended the convertibility of the U.S. dollar into gold. The preceding arrangement, called the Bretton Woods system or Bretton Woods-IMF regime, was based on fixed exchange rates against a dollar officially linked to gold. In the spring of 1973, the major industrialized countries adopted floating rates, allowing the value of their currencies to be determined in the market. Nonetheless, the U.S. dollar has remained the dominant international currency in the sense that many countries, including those in...

  9. 6 Toward an Exchange Rate Mechanism for Emerging Asia
    (pp. 121-136)
    GONGPIL CHOI

    The merits of alternative exchange rate arrangements for emerging Asia continue to be discussed extensively. Proposals range from calls for the establishment of common basket pegs and coordinated floats to blueprints for a single regional currency. The reasons for this interest are not hard to find. Given the extent of intra-Asian trade, the development of intra-Asian supply chains, and the growth of intra-Asian foreign direct investment (FDI), fluctuations in individual Asian currencies can have a significant impact not only on the issuing countries but also on their neighbors. Thus the preoccupation with regional exchange rate arrangements and not just individual...

  10. 7 Parallel Processes? Monetary Integration in Europe and Asia
    (pp. 137-156)
    BARRY EICHENGREEN

    Parallels are frequently drawn between monetary integration in Europe and monetary integration in Asia, both by those who argue that Asia should emulate Europe’s example and by others warning that it should not. Like Europe in the 1950s and 1960s, Asia has achieved a remarkable expansion of intraregional trade, strengthening the argument for a cooperative arrangement to prevent trade flows from being disrupted by exchange rate fluctuations. As in Europe, the growth of foreign direct investment (FDI) and regional supply chain linkages has heightened the sensitivity of producers and investors to exchange rate–related problems. And, not unlike Europe’s experience...

  11. Contributors
    (pp. 157-158)
  12. Index
    (pp. 159-164)