Is Asian Currency Unit Attractive to East Asian Economies?

Bin Zhang and Fan He

China & World Economy, 2007, vol. 15, issue 1, pages 62-76

Abstract: Pegging the RMB exchange rate to the Asian currency unit (ACU) has not, at least in the short term, been proved a better solution than pegging to the US dollar or pegging to a G-3 (US$, Japanese yen and euro) currency basket. Although the Asian currency unit can help Asian economies to keep the relative price of regional currencies stable, the cost of joining a formal regional monetary cooperation is the relinquishment of the autonomy of their domestic policies. Asian monetary cooperation needs to provide more potential benefits if it is to attract Asian economies. We argue that Asian monetary cooperation should be designed to solve the problem of regional trade imbalance, and regional exchange rate policy coordination should be adopted as the first step towards exchange rate cooperation. Copyright The official journal of The Institute of World Economics and Politics, Chinese Academy of Social Sciences (CASS) 2007.

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