Exchange Rate, Monetary And Financial Issues And Policies In Asia

CONTENTS......Page 8
Foreword......Page 6
BIOGRAPHIES OF EDITORS......Page 10
BIOGRAPHIES OF CONTRIBUTORS......Page 11
Introduction......Page 16
References......Page 24
I. Overview......Page 26
1.1. Introduction......Page 28
1.2. Post-Crisis Changes......Page 29
1.3. Forecasting Is Risky, Especially When It Involves The Future......Page 40
1.4. The Crisis Part of the Story......Page 44
1.5. Concluding Remarks: The Credit Crisis and Asia’s Reaction......Page 51
References......Page 54
II. Exchange Rate Regimes and International Reserves......Page 58
2.1. Introduction......Page 60
2.2. Official Exchange Rate Regimes in Asia......Page 62
2.3.1. Existing Classifications......Page 69
2.3.2. Some Simple De Facto Measures......Page 75
2.3.3. Frankel–Wei Tests: Static Estimates......Page 76
2.3.4. Frankel–Wei Tests: Dynamic Estimates......Page 81
2.3.5. Exchange Rate Flexibility Index......Page 88
2.4. Concluding Remarks......Page 96
References......Page 97
3.1. Introduction......Page 102
3.2. A Brief Review on the Determinants of International Reserves......Page 105
3.3.1. Model Specifications......Page 109
3.3.2. Estimation Results......Page 110
3.4.1. Developed or Developing Economies......Page 117
3.4.2. An Asian Phenomenon?......Page 128
3.5. Concluding Remarks......Page 132
References......Page 138
4.1. Introduction......Page 142
4.2. Monetary Control......Page 146
4.2.1. The Technical Sterilization Problem......Page 147
4.2.2. Has Sterilized Intervention Compromised Inflation Objectives?......Page 154
4.2.3. Credit Growth......Page 157
4.3.1. Currency Mismatch and Exposure to Valuation Losses......Page 159
4.3.2. The Quasi-fiscal Cost of Financing and Holding Reserves......Page 161
4.4. Concluding Remarks......Page 163
A.1. Taiwan in the Late 1980s......Page 165
A.2. Korea in 2003–2006......Page 168
Appendix B Estimating the Costs of Reserve Accumulation......Page 169
B.1. Flow Cost: The Cost of Sterilization Operations Over a Period of Time......Page 170
B.2. Stock Cost: The Financial Opportunity Cost of Holding a Stock of Foreign Reserves......Page 173
References......Page 177
III. Capital Flows, Spillovers, and Interdependence......Page 180
5.1. Introduction......Page 182
5.2. Recent Capital Flows......Page 185
5.3. Macroeconomic Conditions......Page 189
5.4. Econometric Approaches and Evidence......Page 193
5.5. Concluding Remarks......Page 195
References......Page 196
6.1. Introduction......Page 200
6.2.1. Time-Varying Spectra......Page 203
6.2.2. Time-Varying Cross-Spectra......Page 207
6.3.1. Individual Spectra for the Core Asian Economies......Page 210
6.4. Increasing Coherence between Asian Economic Cycles?......Page 213
6.4.1. Coherence and Spillovers between the U.S. and China......Page 214
6.4.2. Coherence and Gains between the U.S. and Japan......Page 219
6.4.3. Coherences and Gains between China and Japan......Page 220
6.5. Concluding Remarks......Page 224
References......Page 225
7.1. Introduction......Page 230
7.2.1. Intermediate Goods Trade in East Asia......Page 232
7.2.2. China’s Role in the Global Triangular Trading Patterns......Page 235
7.3.1. Data and Methodology......Page 240
7.3.2. Results......Page 242
7.4.1. Data and methodology......Page 244
7.4.2. Results......Page 246
7.5. Concluding Remarks......Page 249
References......Page 251
IV. Regional Exchange Rate, Monetary and Financial Cooperation......Page 254
8.1. Introduction......Page 256
8.2. Coordination Failure in Exchange Rate Policy among APT Countries......Page 257
8.3.1. Current Situation: Need for Cooperation......Page 262
8.3.2. Way Forward: Multi-Step Approach to Regional Monetary Cooperation......Page 263
Creating an Asian Monetary Unit (AMU) and AMU Deviation Indicators......Page 265
References......Page 271
9.1. Introduction......Page 272
9.2.1. Central Bank Statements......Page 274
9.2.2. Characterization of Exchange Rate Movements......Page 277
9.2.3. Evidence from Policy Reaction Functions......Page 279
9.3.1. What is the Nominal Anchor in a System Based on Coordinated Exchange Rate Policies?......Page 282
9.3.2. Will Exchange Rate Coordination Increase the Risk of Speculative Attacks?......Page 284
9.4. Exchange Rate Policy and the Export Sector......Page 285
9.4.1. Exchange Rate Policy, Openness, and Economic Growth14......Page 286
9.4.2. Implications of Regional Trade Integration for Exchange Rate Policy......Page 288
9.4.3. Political Pressure and Exchange Rate Policy......Page 289
9.5.1. Setting of Policy Instruments Need Not Be Coordinated......Page 290
9.5.2. Harmonization of Goals and Consultation on Institution Building......Page 292
References......Page 294
10.2. Economic and Monetary Integration in Europe before the Euro......Page 296
10.2.1. The Creation and Expansion of the European Union......Page 297
10.2.2. The Move Toward Monetary Integration: The European Monetary System......Page 298
10.3. TheTransition to Monetary Union and the Creation of the Euro......Page 299
10.3.1. The Maastricht Treaty......Page 300
10.3.2. The Creation of the Euro......Page 301
10.3.3. The European Central Bank and the Common Monetary Policy......Page 303
10.4. Effect of the Euro on Stability and Growth of the EMU......Page 304
10.4.1. The Relative Growth of the EMU......Page 305
10.4.2. EMU Monetary and Fiscal Policies for Stability and Growth......Page 306
10.4.3. EMU Trade Openness......Page 307
10.4.4. Conclusion......Page 308
10.5. Lessons from the EMU for Asia......Page 309
10.5.1. Is East Asia an Optimum Currency Area?......Page 310
10.5.2. Could Monetary IntegrationWorkWell in East Asia?......Page 311
10.5.3. Moving Toward Monetary Integration in East Asia......Page 314
10.6. Concluding Remarks......Page 317
References......Page 318
Index......Page 322