MONETARY POLICY COOPERATION TO SUPPORT ASIAN ECONOMIC INTEGRATION

Hwee Kwan Chow, Peter Nicholas Kriz, Roberto Mariano and Augustine H. H. Tan
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Peter Nicholas Kriz: School of Economics Singapore Management University, 90 Stamford Road, Singapore 178903, Singapore
Augustine H. H. Tan: School of Economics Singapore Management University, 90 Stamford Road, Singapore 178903, Singapore

The Singapore Economic Review (SER), 2010, vol. 55, issue 01, 83-101

Abstract: This paper considers the form of monetary policy coordination and regional exchange rate arrangement that would best support economic and financial integration in East Asia. In view of the region's economic diversity, we propose a graduated program of informal policy cooperation from weak forms of cooperation to more intensive modes of cooperation such as the adoption of common monetary policy objectives. An array of informal monetary arrangements rooted to the degree of institutional development can improve the effectiveness of both sovereign and regional institutions, and promote integration in East Asia. Drawing upon the European experience with the Exchange Rate Mechanism (ERM), we conclude that East Asia should first embark on other forms of integration to aid in the development of a high degree of real and nominal convergence amongst the regional countries. Only then would an ERM-type system that employs a regional monetary unit become more sustainable and less susceptible to speculative currency attacks in the region.

Keywords: Regional Economic Integration; Monetary Policy Cooperation; Exchange Rate Arrangements; Sequencing; E58; F31; F33 (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (3)

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DOI: 10.1142/S0217590810003626

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