Trade Intensity and Business Cycle Synchronization: The Case of East Asia

This paper examines whether increasing trade intensity among East Asian countries has led to a synchronization of business cycles. It extends the work of Shin and Wang (2004) in two ways: by (i) improving the specification of their business cycle correlation equation, and (ii) extending the sample to cover the period after the Asian financial crisis. The study finds that intra-industry trade, rather than inter-industry trade, is the major factor explaining business cycle co-movements in East Asia, with important implications for the prospects for a single currency in the region.economic integration; trade intensity; intra-industry trade; business cycle synchronization; East Asia

Economic Integration in East Asia: Trends, Prospects, and a Possible Roadmap

This paper, which is a revised version of the ADB Working Paper on Regional Economic Integration No. 2, reviews trends in East Asian regionalism in the areas of trade and investment, money and finance, and infrastructure. It finds that trade and, to a lesser extent, financial integration is starting to increase in the region. It also finds that business cycles are starting to be more synchronized, enhancing the case for further monetary integration among these countries. The paper also outlines a roadmap for East Asian integration.

Economic Integration in East Asia: Trends, Prospects, and a Possible Roadmap

This paper reviews trends in East Asian regionalism in the areas of trade and investment, money and finance, and infrastructure. It presents various measures of trade and financial integration. An important finding of the paper is that increasing trade and financial integration in the region is now starting to lead to a synchronization of business cycles in a selected group of countries, further enhancing the case for monetary integration among these countries. The paper also outlines a roadmap for East Asian integration.ASEAN/East Asian economic cooperation and integration; business cycle synchronization; free trade agreements; policy coordination

Economic Integration in East Asia: Trends, Prospects, and a Possible Roadmap

This paper reviews trends in East Asian regionalism in the areas of trade and investment, money and finance, and infrastructure. It presents various measures of trade and financial integration. An important finding of the paper is that increasing trade and financial integration in the region is now starting to lead to a synchronization of business cycles in a selected group of countries, further enhancing the case for monetary integration among these countries. The paper also outlines a roadmap for East Asian integration

Trade Intensity and Business Cycle Synchronization: The Case of East Asia

This paper examines whether increasing trade intensity among East Asian countries has led to a synchronization of business cycles. It extends the work of Shin and Wang (2004) in two ways: by (i) improving the specification of their business cycle correlation equation, and (ii) extending the sample to cover the period after the Asian financial crisis. The study finds that intra-industry trade, rather than inter-industry trade, is the major factor explaining business cycle co-movements in East Asia, with important implications for the prospects for a single currency in the region

Monetary and Financial Cooperation in East Asia: The Chiang Mai Initiative and Beyond

"Until recently, not much attention had been paid to the need to promote regional monetary and financial cooperation. This is surprising as cooperation in finance provides more opportunities for "win-win" situations. However, the pace of monetary and financial cooperation has picked up in the postcrisis period. Countries in East Asia appear to have mustered a certain amount of "political will" to propel the process further. Cooperation has ranged from information exchange and surveillance, to establishing regional financing facilities and early warning systems. Beyond the Chiang Mai Initiative, efforts are also under way to coordinate macroeconomic and exchange rate policies mainly under the ASEAN Task Force on ASEAN Currency and Exchange Rate Mechanism of the AsiaEurope Finance Ministers group. As a regional development bank, the Asian Development Bank is supporting the efforts of its developing member countries to strengthen regional monetary and financial cooperation.

Linking South Asia with East Asia: Trends, Potential, and Policies

Recently, there has been growing interest in the evolving economic relationships between South Asia and East Asia. What could be the implications of the re-emergence of the two giant economies or hegemons – India and China - on the region and globally? Could these relationships be the second phase of Pan-Asian integration? Will Asia be as well-integrated as it was during the pre-colonial period? This paper finds that the level of economic integration between South Asia and East Asia, although increasing since 1990, started to surge after 2000, albeit from a low base, mainly because of growing interdependence between India and China. The level of integration is, however, low in relative terms. By calculating the usual indices, the paper finds that, although there are overlaps, there are also significant amounts of complementarities between the two regions on goods and service trade. The level of economic integration between the two regions is, therefore, bound to increase. The paper concludes by identifying a set of measures to enhance policy-led integration between the two regions including those seeking to reduce transportation costs.

The evolving multilayered global financial safety net: The case of the Association of Southeast Asian Nations+3 regional sinancial safety net and the International Monetary Fund

This paper argues that in the aftermath of the global economic crisis, the centralized international monetary architecture or the global financial safety net (GFSN) set up at the Bretton Woods conference is evolving towards a more decentralized multilayered safety net comprising (i) the G20 at the apex as an overarching institution, (ii) multilateral financial safety nets (MFSNs) established under the auspices of the International Monetary Fund (IMF), (iii) bilateral financial safety nets (BFSNs) among central banks, (iv) regional financial safety nets (RFSNs) established in various regions of the world, and (v) national financial safety nets (NFSNs) or reserve accumulation by individual countries. The most significant factor explaining this evolution is financial globalization and the increased incidence of capital account crisis. As in many other regions of the world, Asia has established the ASEAN+3 RFSN, comprising the Chiang Mai Initiative Multilateralization (CMIM) and ASEAN+3 Macroeconomic Research Office (AMRO), for crisis prevention and management. The ASEAN+3 RFSN seeks to complement the IMF. However, because of its ad hoc nature and the relatively small size and cumbersome disbursement procedures, it is unlikely that this facility will be utilized when the next financial crisis hits the region. Based on Europe's experience with RFSN and IMF cooperation, the paper makes the case for a more structured form of cooperation between the ASEAN+3 RFSN and the IMF. Our proposal, together with the recent upgradation of AMRO to an international organization, could greatly enhance the effectiveness of the ASEAN+3 RFSN

Re-invigorating South Asia by deepening Look East policies

This paper will argue that one way of re-invigorating South Asia is to deepen its “Look East” policies. Greater trade and investment with East Asia (defined as ASEAN+3) will not only re-energize South Asian economic integration which has stalled at a low level (for political reasons) but lead to greater economic dynamism in South Asia. Deeper integration within the sub-region and economic growth will, in turn, lead to the “re-emergence” of Pan-Asia

Tracking East Asia's Recovery from the Capital Account Crisis: Analysis, Evidence and Policy Implications

The strong recovery of the five crisis-affected countries of East Asia between 1999 and 2000 has revived the debate on the causes of the 1997 financial crisis. Initially there had been an emerging consensus that the crisis had originated from the capital account. However, some analysts see the faster-than-expected recovery as a vindication of IMF policy prescriptions, which tended to treat the crisis as a problem with the current account. This paper shows that the capital account interpretation is still relevant and that the recovery process is being dominated by factors directly related to the 1997 crisis