No. 12 — March 24, 2000

Feature Article

EAST ASIAN MONETARY UNION: MORE THAN JUST TALK?

Marc Castellano

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Summary

Just a few years ago, the concept of monetary union in East Asia was regarded as little more than an intellectual fantasy. Significant changes in the global economy, however, have turned traditional thinking inside out. The rapid pace of regional integration, the experience of major financial crises and the emergence of the euro have caused policymakers to seriously consider the idea of an East Asian monetary union.

Of course, the implementation of such a grandiose plan would require substantial time and effort. Current economic disparities and political barriers clearly are prohibitive, but East Asia is growing closer. Moreover, a monetary union could exploit the global trend toward fewer currencies as well as satisfy the region's hunger for greater economic strength and stability.

Initially, countries may group together based on their similarities and develop cooperative arrangements to lay the groundwork for a future regional monetary union. Of course, a broad plan that outlines convergency requirements and establishes firm deadlines also is required. Yet little progress is likely unless the effort can secure the backing of strong political and economic forces.

A logical candidate for this role is Japan, the traditional engine of growth for East Asia. However, the goal of creating a yen bloc is not realistic because the region relies on the dollar for most international financial transactions, making it both inconvenient and risky for countries other than Japan to increase their use of the yen. Moreover, many East Asian victims of Japan's wartime aggression remain uncomfortable with the idea of placing the country in any kind of dominant position, economic or political.

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Old Idea, New Context

Despite the fact that various kinds of monetary unions have been established throughout modern history, discussions of such an arrangement in East Asia are relatively new. The formation of the Asia Pacific Economic Cooperation forum in 1989 spurred the first significant interest in the idea, and ancillary committees were set up within APEC to examine the issue. In 1991, at the behest of the Bank of Japan, an 11-member group of central banks in the region was established to foster greater economic integration. The Executives' Meeting of East Asia-Pacific Central Banks initially focused on information exchange but gradually directed more attention to monetary cooperation. Although APEC and EMEAP can be credited with planting the seeds of interest in an East Asian monetary union, serious talk did not begin until the late 1990s, after a series of major developments prompted financial leaders to question conventional economic wisdom and completely rethink their approach.

First, the devastating effects of the East Asian economic crisis, sparked in mid-1997 by the devaluation of the Thai baht, and the related global financial crisis, triggered by the Russian debt default in August 1998, shook the foundations of the international monetary system. As a result, a raging debate began over the basic elements of the so-called global financial architecture. Because significant evidence suggested that currency volatility was a root cause of the turmoil, one area of international policy discussion focused on the timeless issue of how to determine appropriate exchange rate regimes. Rigid systems, which had failed to stand up to a rapidly changing world economy, were denounced as structurally deficient. Yet conventional alternatives — pure or managed floating regimes, exchange rate target systems and others — were not immune to problems either. Policymakers, hungry for stability, began a serious examination    of certain more extreme ideas, like monetary union.

A second factor that sparked the discussions about an East Asian monetary union was the launch of the European Monetary Union. In January 1999, 11 European nations abandoned their national currencies in favor of a single new currency, the euro. Skepticism that such an arrangement would ever be realized persisted almost until the very moment it went into effect. However, the EMU, now more than a year old, seems destined to succeed. Moreover, the single currency has begun to deliver some of the benefits it had promised. A pan-European bond market has emerged, cross-border bank mergers have increased and businesses have become more efficient through consolidation. The establishment of a viable monetary union proves that, under the right conditions, such a system is not only possible but also is practical. Given the recent success of the EMU, is it time to begin thinking about an EAMU?

Of course, a requisite level of political and economic integration is an essential precondition for monetary union. By almost any measure, Europe certainly is far ahead in this regard, but East Asia is advancing rapidly. Intraregional relations — in terms of trade patterns, investment flows and political arrangements — grew stronger in the 1990s, particularly in Southeast Asia. The depth of regional linkages was highlighted in an unfortunate way in 1997 by the economic and financial crisis, which spread quickly and indiscriminately across borders. For better or worse, East Asian countries have become more interdependent. Because of this new cohesion, ideas that once seemed farfetched now have entered the realm of possibility. Association of Southeast Asian Nations Secretary General Rodolfo C. Severino concluded in August 1999 that "[b]ecause of the degree of economic integration that has been achieved, the idea of an Asean currency, like a customs union and a common market, has at least become thinkable."1

Several other East Asian leaders, who in recent years have promoted deeper economic integration and have advocated exploring the idea of monetary union, seem to agree. A number of key Japanese and Taiwanese policymakers have called for a common currency in East Asia. Just before the January 1999 launch of the euro, the chief executive of the Hong Kong Monetary Authority, Joseph Yam, floated the notion of an Asian monetary union, formally putting the issue on the region's agenda for the first time.

In October 1999, Hong Kong Financial Secretary Donald Tsang, who had been working to build economic links between his home territory and Singapore, disclosed his long-term ambition to facilitate the emergence of a common Asian currency. He suggested that to better prepare for the new set of global challenges, Singapore and Hong Kong consider moving toward a common currency that eventually could be expanded to include all of East Asia. A month later, Philippine President Joseph Estrada opened the annual Asean summit by calling on the group's 10 member countries to work toward an East Asian common market and a single regional currency.

Additional indications of interest have appeared in policy statements and have been expressed at other regional gatherings. The Hanoi Plan of Action, a key vision statement issued by Asean in December 1998, called for a study of the feasibility of an Asean currency and exchange rate system. At the June 1999 Fifth International Conference on the Future of Asia, sponsored by Nihon Keizai Shimbun, Japan's leading business daily, both Malaysian Prime Minister Mahathir Mohamad and Mr. Estrada sang the praises of economic integration and even broached the idea of forming a regional currency bloc (see JEI Report No 22B, June 11, 1999). Soon afterward, Malaysia sponsored a forum on East Asian monetary union, which spurred the establishment of an International Monetary Fund panel to study the issue.

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Still A Long Way To Go

With all the talk, it may seem that conditions in East Asia are ripe for monetary union. However, even a cursory analysis quickly leads to the opposite conclusion. Indeed, significant barriers must be overcome before an East Asian monetary union can be established. First, the economic disparities within the region are tremendous. For example, 1999 growth rates were close to zero in Indonesia, while they reached double digits in South Korea (see Table). Per capita income levels run the gamut from Singapore's $32,810 to Vietnam's $335.2 Government debt levels, current account balances and interest rates also differ significantly. Moreover, the region's varied economic systems, which can be categorized into shades of free-market capitalism and state-run socialism, starkly contrast with one another. Finally, overall output is remarkably lopsided; in absolute terms, Japan's economy is larger than that of the rest of East Asia combined.

Real Growth and Per Capita Income
of East Asian Economies


Growth[1]

Per Capita Income[2]

China

7.1%

$860

Hong Kong

2.2

25,200

Indonesia

0.2

1,110

Japan

0.6

38,160

Malaysia

5.0

4,530

Philippines

3.0

1,200

Singapore

5.6

32,810

South Korea

10.0

10,550

Taiwan

5.4

13,060

Thailand

4.5

2,740

Vietnam

5.0[3]

335

[1]Gross domestic product growth, 1999.
[2]Most recent dollar figures available.
[3]Official government estimate.

Sources: Growth rates, Goldman Sachs and Co., Inc.; per capita income, Asia Pacific Economic Cooperation Secretariat.

Political barriers may be even greater. The leadership in many countries is loath to give up sovereignty for a supranational cause, especially when the ruling regime, often an oligarchy, already is preoccupied with containing various internal threats. Another limitation stems from the simple fact that many nations may not be willing to accept a currency that bears a foreign symbol, especially when citizens are accustomed to seeing their own national heroes or royalty on bills and coins. Moreover, the legacy of World War II is manifest in a healthy degree of mutual mistrust and animosity between Japan and many of its East Asian neighbors. Finally, unresolved disputes, ranging from conflicting territorial claims in the Spratly Islands to lingering quarrels between the People's Republic of China and Taiwan, also continue to frustrate cooperative efforts. Thus, no regional hegemony has emerged. Without a strong leader or a basic level of trust, monetary union simply is not possible.

Other signs suggest that talk of a monetary union is premature. Hong Kong authorities were compelled to repudiate Mr. Tsang's October 1999 comments to quell speculation that the city-state might be considering abandoning its 17-year-old pegged exchange rate system. In cautioning that the "idea of an Asian monetary union is farfetched," Mr. Yam, who had been a vocal advocate of the concept, also changed his tune in order to reassure international investors that financial stability was not in question.3

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Not That Farfetched

The East Asian financial crisis provided some powerful lessons for the countries that bore the brunt of the turmoil. Anxious to avoid repeating the same mistakes, leaders of the affected nations sought to identify the underlying causes. Among the numerous theories put forward, one seemed to gain nearly universal acceptance: the idea that overdependence on the dollar and structurally deficient exchange rate regimes were the chief contributing factors to the crisis. Accordingly, leaders concluded that currency stability was key to avoiding financial crises. But since traditional approaches are inherently problematic, achieving such balance is no easy task. Capital controls can scare off critical foreign investment, while increasing the flexibility of exchange rate systems does not guarantee reduced currency volatility. Thus, the idea of a regional monetary union gained prominence as a practical, if somewhat radical, solution to prevent an encore of the 1997-99 financial crisis.

East Asia is made up of several small countries, each of which easily could be overwhelmed by global economic forces. Because cross-border capital flows move at tremendous speeds and volumes, unexpected shifts in market sentiment could devastate the smaller economies of the region. Furthermore, as Mr. Tsang has commented, maintaining so many sovereign currencies in the region is a "recipe for instability."4 A monetary union in East Asia would significantly diminish the vulnerability of individual nations to speculative attacks. Leverage gained from collective strength particularly could benefit such city-states as Hong Kong and Singapore as well as smaller regional powers like Brunei.

Moreover, monetary union has several other attractions. First, it would eliminate currency transaction costs, thus enabling firms to conduct business much more efficiently. Additionally, regional price transparency would spur competition, leading to productivity gains. Most importantly, convenience and stability would promote trade and investment in the region. Tourism, a key industry for many Southeast Asian countries, also would get a boost.

Economic integration is another trend that suggests that East Asia eventually may be able to form a workable monetary union. During the early 1990s, intraregional trade and direct investment increased dramatically.5 Comparisons from the middle of the decade show that the pattern continued, with the share of exports destined for countries within the region reaching 48.7 percent in 1996, up from 30.9 percent in 1986.6

In more recent years, bilateral and multilateral relationships have grown stronger in political and economic terms. Asean, for example, has launched a free-trade area initiative that seeks to eliminate trade barriers among its core founding members — Indonesia, Malaysia, the Philippines, Singapore, Thailand and Brunei — by 2002. An agreement that would ease access to cross-border manufacturing investment also is under discussion. A number of other countries are working on creating free-trade areas, which, if realized, would represent a giant step forward for economic integration. Japan, for example, is talking with South Korea and Singapore,7 while South Korea is examining possibilities for cooperation with China and the Asean nations.

Global forces also could influence the development of a monetary union in East Asia. Indeed, currency blocs seem to be in fashion. The euro is flourishing, and the EMU is moving quickly to expand its membership. Because much of the economic activity in North and South America revolves around the U.S. currency, several less-stable developing countries actively are considering adopting it as their own. A "dollarization" plan has been proposed in Argentina, El Salvador and Ecuador. Even Mexico has flirted with the idea, though serious discussions have yet to materialize.

In short, economists suggest that with regionalism on the rise, currency blocs may follow. In the words of Nobel laureate Robert Mundell:

It seems inevitable that the example of Europe will be followed elsewhere, particularly, but not exclusively, in Asia, as the disintegration of the international monetary system creates a new externality that can be internalized, as a second-best alternative to an international monetary system, by regional monetary arrangements.8

Michel Camdessus, former head of the IMF, has agreed: "In the long run, we are moving toward a world of fewer currencies."9

Of course, critics rightly charge that East Asia lacks the fundamental conditions necessary for monetary union. However, it is important to note the perspective of those interested in pursuing the idea. Proponents acknowledge that monetary union is impossible in the short term but consider it feasible in the long term. To realize the goal in the future, leaders must begin laying the groundwork today. The divergence among European countries was considerably larger when discussion about currency union began, so making such grandiose plans now for the future of East Asia is not necessarily out of line.

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Likely First Steps

It is useful to distinguish between two closely related terms that sometimes are used interchangeably: "common currency" and "monetary union." The difference is that the former is a more advanced form of the latter. More specifically, one or more countries establish a monetary union when they agree to fix their exchange rates. Such an arrangement represents the first step toward a common currency, a more integrated economic relationship under which two or more nations adopt a single currency. Presently, attention in East Asia is focused on the creation of a monetary union because it is a precondition for establishing a common currency, the ultimate goal.

Discussions of issues concerning monetary union traditionally revolve around the concept of optimum currency areas, a theory that identifies the economic circumstances under which it is beneficial to establish such an arrangement. Countries that are small and open to trade, for example, may be suited to enter into a monetary union. Other important elements of an optimum currency area include a highly mobile labor force, flexible real wages and a low incidence of asymmetric shocks (external changes that affect each country differently).10

Do such conditions exist anywhere in East Asia? The short answer is no, but a few areas do have potential. On a narrower scale, three possible monetary unions might be composed of the Asean countries, Greater China — meaning mainland China, Taiwan and Hong Kong — or Japan and South Korea.

The member nations of Asean are moving rapidly toward economic integration. Intraregional trade steadily increased during the last decade, and a new level of cooperation, spurred by the need to overcome the financial crisis, has emerged more recently. In 1998 and in 1999, the group laid out a series of plans to advance the process of economic integration. The agenda for a number of the goals even has been pushed forward. Part of the free-trade pact, for example, will go into effect one year early for Asean's six core members. The investment agreement, another key initiative, will be implemented in 2003 instead of 2010, as originally scheduled.

Although the borders between Asean members are becoming more fluid, significant barriers to monetary union remain. The organization's newest members — Cambodia, Laos, Myanmar (formerly Burma) and Vietnam — differ significantly from the core founding members. The relative newcomers are transition economies more resistant to reforming and conforming to the lines of Asean's common agenda, and they lag behind the core members in terms of economic development. Furthermore, because the group of new members places a high priority on the protection of sovereignty and nonintervention, achieving solidarity on important issues often is difficult. Thus, not all Asean members may be able to realize the extremely high level of cooperation needed to make monetary union work.

Instead of an Asean-wide arrangement, a more viable option may be a pact that involves just the core members, countries that have much more in common. Brunei, for example, already pegs its currency one-for-one to the Singapore dollar. Under a so-called interchangeability arrangement, the currency of each country is allowed to circulate in the other. Other than proximity, however, few complementarities exist between the two that justify the currency agreement. Analysts suggest, then, that other Asean nations conceivably could replicate the Brunei/Singapore example.

A second possible monetary union could spring up within Greater China. Since economic and cultural ties among the mainland, Hong Kong and Taiwan run deep, sufficient preconditions seem to be in place. Politically, however, the three entities are worlds apart. Beijing claims that Taiwan is a renegade province and continues to threaten a military takeover. Although Hong Kong officially is part of China, the city-state maintains its own monetary authority. Moreover, the booming metropolis allows, by special arrangement, many more freedoms than its much-larger parent government. Yet, if cross-straits relations were normalized and the three economies were united under one political force, a monetary union would be an easy, almost natural step.

A third possible subregional arrangement would involve Japan and South Korea. The two enjoy geographic proximity and recently have made substantial progress in strengthening economic ties. Trade barriers have been toppled and cultural tensions have been eased. Currently, bilateral discussions about concluding an investment agreement and a free-trade area also are underway. However, although Japan and South Korea are growing closer in many respects, monetary union is a long way off. Long-held animosities run deep and neither country is ready to subordinate monetary policy to the other. Nevertheless, because the two nations are close neighbors, are more alike economically than most other East Asian nations and are working to integrate commercial relations, a future monetary union may be in the cards.

These scenarios are considered the most likely first steps toward the eventual development of a greater East Asian monetary union. In theory, the most compatible countries would converge and integrate first, gradually harmonizing their economies among themselves. The resulting clusters would link up to form a single superstructure that eventually would constitute the full monetary union. Indeed, such a plan already has been proposed by Mr. Tsang, who suggested last October that Hong Kong and Singapore consider moving toward adopting a common currency to create a relationship that later could be widened to include the rest of East Asia.

Of course, it will take much more than talk to effect the changes necessary to begin the preparatory work. Most trade is conducted in dollars, and many East Asian currencies are linked closely to the greenback. Dependence on the American currency must be reduced before regional monetary integration can begin. Moreover, tariffs and restrictions on inward foreign direct investment will have to come down. Immigration and labor laws also will have to be loosened. To initiate realistic planning, governments will have to create a set of convergence criteria — such as those adopted for the euro under the 1992 Maastricht Treaty — that will bring public debt levels, inflation rates and long-term interest rates in line. Firm deadlines will have to be established for each objective.

Most importantly, if East Asia is to move toward a monetary union, it needs a strong nation to provide a currency anchor and to push the initiative forward. Observers have suggested Singapore for that role because the city-state's currency is one of the region's most stable. Moreover, the Singapore Monetary Authority is widely viewed as exceptionally sober and effective. However, the government's position long has been against the internationalization of its currency. In addition, with a population of only 4 million, Singapore is too small to be an effective regional political or economic force.

Neither Japan nor China, the two largest economies, are likely to lead the way. The Chinese economy suffers from a host of problems including slowing growth, stubborn deflation and high unemployment. Moreover, the Chinese yuan is not even freely convertible. The Japanese economy may be structurally more sound, but its performance has been dismal since the late 1990s. Finally, despite Tokyo's longtime interest in internationalizing the yen, for the most part, efforts to do so have proved futile.11

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Dreaming Of A Yen Bloc

Internationalization of the yen not only would benefit Japanese businesses and banks but also would advance an important political objective. Reduced exchange rate risk would help make the operation of multinational corporations more profitable, while greater use of the yen abroad would raise Japan's profile as an international economic power. Thus, since the early 1980s, Tokyo has been trying to figure out ways to bolster the status of the yen overseas. However, because the structure of the global financial system is centered on the dollar, few incentives exist for any country, even those in East Asia, to substantially increase usage of the yen.

Despite such challenges, the Ministry of Finance initiated a new effort to internationalize the yen in 1998. A special commission was established to recommend a strategy for pursuing the objective and several reports, meetings and hearings on the topic soon followed. As a result, promoting the yen became an official goal of the government of Prime Minister Keizo Obuchi and was quietly added to the foreign policy agenda. In October 1998, Finance Minister Kiichi Miyazawa introduced a $30 billion aid package to help reeling East Asian nations recover from the economic crisis.12 The main thrust of the so-called Miyazawa Plan was to extend soft credits to cash-strapped governments, but officials also hoped that distributing huge yen-denominated loans would expand the presence of the Japanese currency in regional financial markets. The idea was that East Asian countries not only would become accustomed to using yen but also would develop an incentive to hold yen-denominated assets as their yen-denominated debts increased.

Japanese leaders began to promote the currency in multilateral forums and during trips overseas. Mr. Obuchi sang the praises of a tripolar regime, based on the dollar, the euro and a strong yen, during his January 1999 trip to Europe. On the fringes of the annual Asian Development Bank meeting the following May, Mr. Miyazawa met with his counterparts from China, South Korea and the Asean countries to discuss expanding the yen's use in trade and investment transactions (see JEI Report No. 19B, May 14, 1999). At an April 1999 forum on the impact of the euro, then-Vice Finance Minister for International Affairs Eisuke Sakakibara proclaimed Tokyo's commitment to making a full-fledged effort to reform the Japanese financial system in order to improve the prospects for the yen's internationalization.

One of the main reasons that the role of the yen in the global economy remains limited is the relatively underdeveloped status of Japan's financial sector. To improve its efficiency and capabilities and raise the stature of Japan's financial markets, Tokyo launched the Big Bang deregulation initiative in April 1998.13 One of the most visible and important changes wrought by the reform was the loosening of capital account restrictions. Tokyo also introduced a variety of new financial instruments and incentives to spur global interest in yen-denominated investment vehicles, including measures that created a greater range of bond maturities, reduced transaction fees and taxes, and enhanced efficiency of settlement and clearance procedures.

However, financial-sector reform, official cheerleading and yen-based foreign aid programs have done little to raise the yen's profile. Because much of the Miyazawa Plan money went to Japanese affiliates in East Asia that used the funds to pay back dollar-based debt, which represented the bulk of their borrowing, yen proliferation remained limited. Moreover, Tokyo's efforts have done little to change the fact that most trade in the region still is settled in dollars. Although Japan's yen-based exports to South Korea increased 5.9 percent in the first seven months of 1999, such a small advance cannot be considered significant. The dollar still is used to clear almost 90 percent of South Korea's trade.

A host of other barriers prevents the wider use of the yen in East Asia. First, because it is a minor currency, its function as a global medium of exchange is limited. In other words, most of East Asia's international capital flows from such activities as bank lending, foreign direct investment, trade and aid are financed in dollars. Moreover, the majority of the region's foreign currency reserves are in dollars. Thus, using yen is not only inconvenient but also involves currency risk. Second, because the yen's value fluctuates wildly with the dollar, its attractiveness as a store of value is limited. In the 1990s, the yen/dollar rate moved roughly between ¥80=$1.00 and ¥150=$1.00.14

Third, the Japanese economy as a whole essentially has been stagnant for the last decade, greatly diminishing Japan's economic prowess and raising questions about the credibility of Japan's central bank. Fourth, despite Tokyo's longstanding official endorsement of the internationalization of the yen, strong domestic support for the policy has been absent. Internal ambivalence has hampered a steady, concerted effort to implement measures to promote the yen and has led East Asian capitals to question Tokyo's resolve.

Finally, regional political factors may form the biggest barrier to any kind of potential yen bloc. Much of East Asia remains wary of any form of Japanese leadership. China is deeply suspicious of Japan and would never allow it to establish a de facto economic hegemony. South Korea harbors similar sentiments and likely would resist any plan to adopt the yen as a regional currency.

On the other hand, limited support for a yen bloc has come from other quarters. Hong Kong's Mr. Tsang commented last October that an East Asian monetary union likely would revolve around the Japanese currency, despite the reservations that such dependence might raise with some nations. He urged that past prejudices be pushed aside. In a February 2000 meeting with representatives of more than 700 Japanese companies, Malaysian International Trade and Industry Minister Dato Seri Rafidah Aziz discussed economic integration (see JEI Report No. 10B, March 10, 2000) and indicated Asean support for the yen's internationalization. But she also noted that Japan itself may not be ready to expand the use of its currency.

A multilateral agreement that fostered the use of the yen could reduce East Asia's dependence on the dollar and would be a step toward eventual currency union. Beyond this, however, the region has few reasons to embrace the Japanese currency more fully. Tokyo has secured a weak level of support, but unless key political and economic barriers are removed, the idea of a yen bloc in East Asia is likely to remain a pipe dream.

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Conclusion

As recently as a few years ago, monetary union in East Asia was unthinkable. But the international monetary system has undergone significant changes that have caused financial leaders to take a serious look at ideas that were previously considered outlandish. In 1999, the prospect of monetary union in East Asia was placed on the regional agenda for the first time. Discussions have just begun and, thus, have produced more conjecture than substance. For this reason, some observers have dismissed the concept as insignificant. That, however, misses the point that an important and rapid transformation has occurred. The idea of an East Asian monetary union is not new, but, in the span of little more than a year, it has gone from a laughable concept to possible policy goal.

Of course, the challenges still to be overcome are substantial. Diverse economic and political systems, unresolved territorial disputes and cultural animosities will frustrate efforts to advance regional cooperation to even the minimal level necessary for monetary union. However, such key benefits as stability will encourage leaders to work toward economic integration. If a full monetary union is to become a reality in the long term, the process likely will be a slow and gradual one. One scenario suggests that the more compatible countries first will work toward harmonizing their economic systems, eventually linking their currencies. These integrated clusters then will join with the others to form a complete East Asian monetary union.

How long will this take? Estimates vary from 20 years to 50 years. However, such significant steps as the development of clusters could occur within the next three years to 10 years. To be sure, current discussions are in an embryonic stage, but the level of interest has made a quantum leap from just a few years ago. The general opinions voiced at the August 1999 Malaysia-sponsored conference reflect the regional leadership's stance on the issue. Participants acknowledged that the creation of an East Asian monetary union would be an ambitious and time-consuming undertaking. However, they also concluded that the initial steps already had been completed. Some even were cautiously optimistic about the prospect.

Andrew Hayashi provided research assistance.

The views expressed in this report are those of the author
and do not necessarily represent those of the Japan Economic Institute

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Notes
aaa

1aa Rodolfo C. Severino, Secretary General, Asean, speech at the regional conference on Common Currency for East Asia: Dream or Reality, "An Emerging East Asian Community: Reality Or Mirage?" Penang, Malaysia, August 5, 1999. Available at http://www.aseansec.org/secgen/sg_eac.htm. Return to Text

2aa Per capita income figures are from the Asia Pacific Economic Cooperation's list of economic indicators. Data available at http://www.apecsec.org.sg/member/indi.html. Return to Text

3aa Enoch Yiu, "Yam retreats from monetary union," South China Morning Post, October 30, 1999. Return to Text

4aa Ravi Velloor, "Tsang: Single currency for HK and S'pore?" The Straits Times, October 22, 1999, p. 76. Return to Text

5aa See C.H. Kwan, Economic Interdependence in the Asia Pacific Region, (Routledge: London and New York, New York, 1994), pp. 100-118. Return to Text

6aa Jose M. Galang Jr. "Common currency: economic, political convergence first," Business World, August 11, 1999. Return to Text

7aa See Marc Castellano, "Japan, Northeast Asia And Free Trade: Coming Together At Last?" JEI Report No. 47A, December 17, 1999. Return to Text

8aa Robert A. Mundell, "Optimum Currency Areas," speech at A Conference on Optimum Currency Areas at Tel Aviv University, Tel Aviv, Israel, December 5, 1997. Available at http://www.columbia.edu/~ram15/eOCATAviv4.html. Return to Text

9aa Michel Camdessus, "Camdessus outlines agenda for IMF at start of the twenty-first century," Council on Foreign Relations address, IMF Survey, XXIX, No. 3, February 7, 2000, p. 35. Return to Text

10aa The optimum currency area, a concept pioneered by Nobel Laureate Robert A. Mundell, received much attention during the period that preceded the formation of the EMU. See Robert A. Mundell, International Economics (New York, New York: Macmillan, 1968), pp. 177-186. Return to Text

11aa See Marc Castellano, "Internationalization Of The Yen: A Ministry Of Finance Pipe Dream?" JEI Report No. 23A, June 18, 1999. Return to Text

12aa See Marc Castellano, "Japanese Foreign Aid: A Lifesaver For East Asia?" JEI Report No. 6A, February 12, 1999. Return to Text

13aa For an overview of the first phase of Big Bang reforms, see Jon Choy, "Japan's Financial Market Big Bang: The First Shock Waves," JEI Report No. 22A, June 12, 1998. For an update on securities industry reform, see Jon Choy, "Japan's Securities Industry: From Big Bang To E-boom," JEI Report No. 22A, June 11, 1999. Return to Text

14aa See Arthur J. Alexander, "Causes And Consequences Of The Weak Yen," JEI Report No. 26A, July 10, 1998. Return to Text

The views expressed in this report are those of the author
and do not necessarily represent those of the Japan Economic Institute

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