The Evolutionary Process of East Asia’s Monetary Integration
After the 1997 Asian crisis, monetary integration in East Asia has been intensively discussed in the literature. The objectives of the Asian monetary integration are: the expansion of intra-regional trade and investment, the free movement of labor and capital, and the prevention of region-wide financial crises. The essential element in achieving these objectives is the maintenance of region-wide exchange rate stability.
This paper argues that monetary integration will take an evolutionary process passing through three different stages. In the first stage, exchange rate policy coordination will take place as the primary event. In the second stage, national currencies and a regional common currency will coexist. The exchange rate between a member country’s currency and the regional currency will remain stable. In the third stage, the region’s single currency will be created and the national currencies will be eliminated.
This paper also suggests that the name of Asia’s new single currency should be the Asiro. It is believed that the Asiro can meet the several criteria for being a regional or international currency.
Key wordsMonetary integration Asian currency unit Proper sequencing of market liberalization
JEL ClassificationF33 F36 F42
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