NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Monetary and Exchange Rate Policy Coordination in ASEAN 1

William H. Branson, Conor N. Healy

NBER Working Paper No. 11713
Issued in October 2005
NBER Program(s):   IFM   ITI

This paper develops the basis for monetary and exchange rate coordination in Asia as part of a package of monetary integration that could support growth and poverty reduction. This could be achieved directly through coordinated exchange rate stabilization, and indirectly through the implications of this for reserve pooling and investment in an Asian development fund (ADF) and through development of the Asian bond market (ABM). Macro policy coordination could be viewed as a necessary condition for further development of both reserve pooling via the Chiang Mai Initiative (CMI) and of the ABM. The paper analyzes the trade structure of ASEAN and China in terms of both geographic sources of imports and markets for exports, and of the commodity structure of trade. The similarities of the geographic and commodity trade structures across the region are consistent with adoption of a common currency basket for stabilization, and with an argument for monetary integration across the region along the lines of Mundell (1961) on optimum currency areas. The paper constructs currency baskets and real effective exchange rates (REERs) for the countries in the region. Since their trade patterns are quite similar and their policies are already implicitly coordinated, their REERs tend to move together. This means that ASEAN and China are already moving toward integration in practical effect. Explicit movement toward coordination could support surveillance and reserve-sharing under the CMI, and release reserves to be invested in an ADF.

download in pdf format
   (406 K)

email paper

This paper is available as PDF (406 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w11713

Users who downloaded this paper also downloaded these:
Ogawa and Kawasaki Adopting a Common Currency Basket Arrangement into the ASEAN Plus Three
Frankel w11274 On the Renminbi: The Choice between Adjustment under a Fixed Exchange Rate and Adjustment under a Flexible Rate
Dooley, Folkerts-Landau, and Garber w11771 Interest Rates, Exchange Rates and International Adjustment
Freund and Warnock w11823 Current Account Deficits in Industrial Countries: The Bigger They are, the Harder They Fall?
Aizenman and Jinjarak w14453 The US as the "Demander of Last Resort" and its Implications on China's Current Account
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us