Institutions for Economic and Financial Integration in Asia: Trends and Prospects

Asian economic regionalism has emerged from a bottom-up process, driven by market forces in the absence of a grand plan for regional integration. While the financial crisis of 1997-98 triggered new regional cooperation initiatives, more recently several Asian political leaders have formulated proposals for the creation of a regional economic community, suggesting the possible start of a top-down approach. Based on the results of a survey of Asia's opinion leaders conducted by the Asian Development Bank (ADB) in 2010, this paper discusses how Asia's institutional architecture for economic and financial integration is taking shape, suggesting the need to strengthen existing institutions that promote Asian regionalism and to create new ones. While the focus of the paper is on monetary and financial integration, the analysis also covers other integration pillars such as trade and investment, connectivity and infrastructure, and regional public goods. It suggests the need to create new institutions in support of Asian regionalism and to adopt a broad perspective in moving towards the formation of a region-wide economic community based on strong political commitment and grassroots participation

Institutions for Asian Integration: Innovation and Reform

The formation of regional production networks in East Asia has occurred mainly through market forces, without much help from regional institutions in promoting the creation of a single Asian market. While this approach has served the region well in the past, the drastic changes experienced since the 2008 - 2009 financial crisis and the challenges Asian countries are facing - rowing inequalities and competition, on the one hand, and enhanced threats to the environment and people's health on the other - have rendered more urgent the need for intergovernmental cooperation at global and regional levels. Asia's institutions for regionalism need strengthening through reform and innovation such as better governance and resourcing, greater and more effective participation and delegation of powers, overall streamlining of regional architecture, including the phasing out of outdated or irrelevant institutions and, where needed, the creation of new ones. Ultimately, given its rootedness in regional order, institutional efficacy is a function of the ability and willingness of its members, especially influential stakeholders, to collaborate

Exchange Rate Coordination in Asia: Evidence Using the Asian Currency Unit

This paper evaluates the extent of exchange rate coordination among Asian economies using a hypothetical Asian Currency Unit. Rising interdependence among Asian economies makes it vital for these economies to have a certain degree of exchange rate stability. However, the empirical evidence using an Asian Currency Unit suggests a widening deviation in exchange rate movements of the Asian currencies. The deviation has been driven by the adoption of different exchange rate regimes by the participating countries indicating diverse policy objectives. There are a number of institutions in the region that can assist exchange rate coordination and greater economic and financial integration. These institutions, including a multilateralized swap arrangement, a regional surveillance mechanism, and a bond fund; have to be significantly strengthened for them to play a role in fostering greater economic cooperation. The denomination of financial assets in the Asian Currency Unit in transactions involving these institutions would also enhance exchange rate cooperation

Economic integration in East Asia and Europe: lessons from a comparative analysis

This paper compares the economic integration processes of the European Union and the East Asian nations and comments on the possible reciprocal lessons, if any, that can be drawn to smooth the future paths of the two groups. The most relevant lessons on the EU side rely on strong institutionalization, structural policies, and the monetary union. Lessons from East Asia can be found in regional production networks, trade patterns, and the recent developments in financial cooperation. Both entities are presently facing difficult challenges to progress and growth

Backward vertical linkages of foreign manufacturing affiliates: Evidence from Japanese multinationals

We examine the determinants of backward vertical linkages established by multinational firms in host economies through an analysis of the local content ratio of 272 Japanese electronics manufacturing affiliates in 24 countries. Host country factors promoting vertical linkages are the quality of infrastructure and the size of the local components supply industry, while restrictive trade policies have a detrimental effect. Local content regulations have a positive impact but do not stimulate procurement from locally owned suppliers. Experienced affiliates, joint ventures and acquired affiliates, and-in less-developed economies-affiliates of less R&D-intensive firms exhibit more extensive vertical linkages. Firms belonging to Japanese vertical industrial groups (keiretsu) show higher procurement from local clusters of affiliated Japanese suppliers. (C) 2000 Elsevier Science Ltd. All rights reserved.status: publishe