Lessons from the Asian Monetary Fund for the European Monetary Fund. CEPS Policy Brief No. 208, 16 April 2010

On March 24th the members of ASEAN plus three other major Asian economies (China, Japan and Korea) began operations of a fund from which member countries can swap their national currencies for US dollars within a pre-determined limit. This so-called "Chiang Mai Initiative Multilateralization" or CMIM will essentially become an Asian Monetary Fund, once its institutional structure is in place. This paper draws lessons from the Asian experience for the recent debate in Europe over the feasibility and desirability of creating a European stability fund

East Asian Financial and Monetary Cooperation and Its Prospect : Beyond the CMI

This paper examines the ASEAN+3 cooperation of regional financial safety nets, and reviews the regional monetary issues of a single currency and currency competition in East Asia. We point out potential systemic risks in East Asia and the importance of regional surveillance. ASEAN+3 regional surveillance should move forward to the stronger measures of peer review and peer pressure, and make the AMRO a well-resourced professional surveillance secretariat to create capacity to apply independent conditionality. To this effective surveillance mechanism, we propose to establish the Board of Coordination to support the ASEAN+3 ERPD by confirming its decision or remitting the relevant case to the ASEAN+3 ERPD and providing possible legal consultation. The institution building of the CMIM secretariat will accelerate the establishment of a regional monetary institution, e.g. an Asian Monetary Fund. The current crisis provides sufficient incentives for East Asian economies to pursue internationalization of their currencies, and it would open the possibility towards a single currency in East Asia.Regional financial safety nets, surveillance mechanism, CMIM, ABMI

Économie japonaise. Essor, crise et métamorphose d’un « modèle »

Sébastien Lechevalier, maître de conférencesYonghyup Oh, chercheur au Centre for European Policy Studies (CEPS, Bruxelles) Dynamiques industrielles au Japon et en Corée. Stratégies d’entreprises et politiques publiques La désindustrialisation est un problème majeur pour les pays industrialisés, en Europe et en Amérique. C’est également le cas pour le Japon et la Corée du Sud, deux pays dont le développement économique a reposé sur la croissance des industries manufacturières. Ces deux pays so..

The future of the eurozone and gold. CEPS Special Report, 3 September 2010

This report considers four short-term, alternative scenarios for the eurozone and analyses their possible implications for global economic trends and the gold market. Overall, the main findings suggest that in the near future, motives other than inflation hedging will be the main drivers of gold market dynamics. Growth in emerging economies, which are among the largest sources of gold demand, and financial market uncertainty, will be the most important ones. In particular, even if the worst scenario were to materialise and adverse global conditions could slow Asian growth, demand for gold from this region should not fall significantly. Moreover, even in the most optimistic scenario for the eurozone, global uncertainty will not evaporate easily. As a consequence, the gold price may continue to trend upwards for a period driven by investment demand from both the private sector and official investors

International capital market imperfections: evidence from geographical features of international consumption risk sharing

This article attempts to rationalize the validity of gravity variables to explain the degree of international consumption risk sharing. We find that for a panel of 54 countries during 1950-2000, variables such as distance, affluence, a common language and the type of legal system are relevant in explaining not only cross-country consumption and output correlations, but consumption risk sharing. Common law countries share consumption risks more than civil law countries. English speaking countries turn out to share consumption risks more than other language groups, and show significantly higher consumption risk sharing even within the group of common law countries.

East Asian Financial and Monetary Cooperation and Its Prospect: Beyond the CMI

This paper examines the ASEAN+3 cooperation of regional financial safety nets, and reviews the regional monetary issues of a single currency and currency competition in East Asia. We point out potential systemic risks in East Asia and the importance of regional surveillance. ASEAN+3 regional surveillance should move forward to the stronger measures of peer review and peer pressure, and make the AMRO a well-resourced professional surveillance secretariat to create capacity to apply independent conditionality. To this effective surveillance mechanism, we propose to establish the Board of Coordination to support the ASEAN+3 ERPD by confirming its decision or remitting the relevant case to the ASEAN+3 ERPD and providing possible legal consultation. The institution building of the CMIM secretariat will accelerate the establishment of a regional monetary institution, e.g. an Asian Monetary Fund. The current crisis provides sufficient incentives for East Asian economies to pursue internationalization of their currencies, and it would open the possibility towards a single currency in East Asia.Regional financial safety nets, surveillance mechanism, CMIM, ABMI

Determinants of Intra-FDI Inflows in East Asia: Does Regional Economic Integration Affect Intra-FDI?

This paper analyzes the validity of macroeconomic variables, such as exchange rate uncertainty, macroeconomic instability, and openness, in determining intra-FDI inflows in the ASEAN countries, China, Japan, and Korea. Our empirical results show that openness, exchange rates, exchange rate volatility, per capita GDP, and foreign reserve accumulation are statistically significant factors that determine regional intra-FDI inflows; other variables such as macroeconomic instability are not significant. Variables like openness and exchange rate volatility have direct implications for regional FTAs and regional common currency arrangements, and thus to East Asian economic integration. Our findings suggest that a regional FTA that would increase regional openness by 10 percent would increase intra-FDI inflows by almost 2 percent. A regional exchange rate arrangement that would reduce regional exchange volatility by half would increase intra-FDI inflows by around 10 percent.FDI, Openness, Exchange Rate Uncertainty, Exchange Rate, Regional Economic Integration

Sub-Prime Financial Crisis and US Policy Choices

This paper argues that the subprime financial crisis reflects weakness in the real economy of the US from its start. Our comparison with prior US recessions indicates that the epicenters of most of the recessions were in the financial sector and that recessionary pressure was present in the last quarter of 2007 in the US economy. The high level of nations debts combined with a high rate of inflation show a difficult situation US policy makers face. At an international scene, there would be trade-off between protectionist policy measures and the USs role as a global sheriff. Effects of US policy measures, either monetary or fiscal, would be short-living, while more fundamental changes to create productivity gains would be the right policy for recovery of the US economy.financial crisis, Recession, inflation, sub-prime mortgage, financial regulation