Monetary and Financial Cooperation among Central Banks in East Asia and the Pacific

Hans Genberg and Dong He

No 715, Working Papers from Hong Kong Monetary Authority

Abstract: In this paper we show that monetary policy frameworks in the East Asia and Pacific region are heterogeneous, with exchange rate policies being subordinate to domestic price stability objectives in most regional economies. We then argue that in this environment it is undesirable to focus regional cooperation on exchange rate policies because of the risk of creating conflicts with domestic objectives that would lead to loss of central bank credibility and possibly speculative attacks. We also argue that the case for coordinated exchange rate policies is in fact weak, even after taking into account the region¡¦s traditional emphasis on export performance and increasing regional trade integration. Rather than focusing cooperation on the setting of policy instruments, we suggest an alternative that centres on developing more liquid financial markets in the region in the foreseeable future, and on harmonising the objectives of monetary policy and designing institutions that could form the basis of deeper forms of cooperation in the longer-term future.

Keywords: Regional monetary cooperation; exchange rate coordination; East Asia (search for similar items in EconPapers)
JEL-codes: E42 F33 F36 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2007-11
New Economics Papers: this item is included in nep-cba, nep-cna, nep-ifn, nep-mac, nep-mon and nep-sea
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:hkg:wpaper:0715

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