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2014 | OriginalPaper | Chapter

Currency Area East Asia: Cooperation or Confrontation?

Authors : Frank Rövekamp, Hanns Günther Hilpert

Published in: Currency Cooperation in East Asia

Publisher: Springer International Publishing

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Abstract

As East Asia is growing together in real economic terms and becoming the center of gravity of the world economy, voices from business and politics of the region are increasingly calling for intraregional currency cooperation in order to mitigate financial and developmental risks. Taking a closer look, this chapter elaborates the specific environmental conditions for currency cooperation and discusses critically the goals, modes and limits of currency cooperation in the region. Given the diversity of the region and the dominance of national economic objectives, the chapter concludes on a skeptical note to overly inflexible exchange rate systems and overambitious regional funds.

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next chapter China’s Financial System: Past Reforms, Future Ambitions and Current State
Footnotes
1
See: Calvo and Reinhardt 2002, pp. 379–408.
 
2
See: Eichengreen 2013.
 
3
See: Volz 2010, pp. 49–101.
 
4
The dollar also dominates the global foreign exchange markets. As official BIS statistics show, the dollar share amounted to 84.9 % in 2010 thereby dwarfing the shares of the euro (39.1 %), the Japanese yen (19.0 %), the Australian dollar (7.6 %), the Hong Kong dollar (2.4 %), the Korean won (1.5 %), the Singapore dollar (1.4 %) and the Chinese renminbi (0.9 %). See: Bank for International Settlements (BIS) (2010), p. 12. Note: Because two currencies are involved in each transaction, the sum of the percentage shares of individual currencies totals 200 %, instead of 100 %.
 
5
For the choice of exchange rate arrangements of East Asian IMF member countries, see: International Monetary Fund (IMF) (2012), pp. 71–79.
 
6
See: McKinnon and Schnabl (2004), pp. 331–360.
 
7
See: Ito et al. (2010).
 
8
Yam (2012); For an overview on renminbi internationalization see also the contributions of Patrick Hess and Ulrich Volz in this volume.
 
9
Rajan and Shen (2009).
 
10
IMF (2004).
 
11
Malloy (2013). See also the contribution by Andreas Steiner in this volume.
 
12
See: Gagnon (2013).
 
13
See: The World Bank (1993), p. 1.
 
14
For a detailed overview of the events, see for example: Ito (2007), pp. 16–49.
 
15
For the currency policy consequences of the Asian crisis, see: Dieter (2008).
 
16
See: Mundell (1962).
 
17
For the supremacy of party rule in the settings of China's financial system, see Patrick Hess' contribution to this volume.
 
18
For the role of reserve requirements, see the contribution of Franziska Schobert and Lijun Yu in this volume.
 
19
For the example of the “Korea-China Currency Swap for Trade Settlement Facility” see the contribution of Jerome Shin in this volume.
 
20
On renminbi internationalization see: Fratzscher and Mehl (2011), Volz (2013).
 
21
For an assessment of the reform agenda of the new Chinese leadership, see the contribution of Patrick Hess in this volume.
 
22
Government bonds have been purchased by the BoJ under the condition that their value is below the value of all banknotes in circulation.
 
23
BoJ (2013).
 
24
For a critical review of Japan's new monetary policy, see the contribution of Franz Waldenberger in this volume.
 
25
For this point see Kenichi Shimizu's contribution to this volume. For an empirical validation see: Subramanian and Kessler (2012).
 
26
See the contribution of Hans Bleuel in this book for a different view.
 
27
Law and Brereton-Fukui (2013).
 
28
A political consensus was established in 2002, when the East Asian Vision Group recommended to the state leaders of China, Japan, South Korea and the ASEAN-countries “to establish a regional financial facility” and “to pursue a more closely coordinated regional exchange rate mechanism”. In 2012, however, the East Asian Vision Group II suggested only carefully to conduct “a study to explore the usefulness of the establishment of an East Asia monetary fund”. See: East Asia Vison Group Report 2001, p. 3; Report of the East Asia Vision Group II 2012, p. 2.
 
29
See Branson and Healy (2006) and Rajan (2009) for a deeper discussion on different options.
 
30
Rajan (2009).
 
31
Davis et al. (2013).
 
32
See. Vallée (2012), pp. 11–12.
 
33
Aizenman et al. (2010).
 
34
Grimes (2009), pp. 71–117.
 
35
For a critical assessment of the Chiang Mai process see the contribution of Werner Pascha in this volume.
 
36
For an overview see: Siackhachanh (2012).
 
37
For the political aspects of currency cooperation see: Shimizu (2013).
 
Literature
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Metadata
Title
Currency Area East Asia: Cooperation or Confrontation?
Authors
Frank Rövekamp
Hanns Günther Hilpert
Copyright Year
2014
Book
Currency Cooperation in East Asia

Print ISBN: 978-3-319-03061-6

Electronic ISBN: 978-3-319-03062-3

Copyright Year: 2014

DOI
https://doi.org/10.1007/978-3-319-03062-3_1