Monetary Autonomy in Select Asian Economies: Role of International Reserves

Hiroyuki Taguchi (), Geethanjali Nataraj () and Pravakar Sahoo

Macroeconomics Working Papers from East Asian Bureau of Economic Research

Abstract: This paper examines the trends in monetary autonomy and its interaction with financial integration, currency regime and foreign reserves for the past two decades in select Asian countries viz., Thailand, Korea, Indonesia, Philippines, and India. Our main findings are as follows : First, Thailand, Korea and Indonesia, who experienced the change in currency regime towards a floating regime, have lowered the sensitivities of their interest rates (have raised monetary autonomy) after the regime change, while India without any change in currency regime has continued to raise the sensitivities of its interest rates (has lowered monetary autonomy) in line with increased financial integration. Second, in all sample economies, the accumulation of foreign reserves has contributed to retaining monetary autonomy in terms of preventing the sensitivities of interest rates from rising. We speculate that their accumulation might take a role as an anchor for monetary autonomy to the emerging market economies facing fear of floating.

Keywords: monetary autonomy; financial integration; currency regime; foreign reserves; Asian emerging market economies; fear of floating (search for similar items in EconPapers)
JEL-codes: E52 F33 F41 (search for similar items in EconPapers)
Date: 2010-01
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Journal Article: Monetary autonomy in selected Asian economies: The role of international reserves (2011)
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