Income Convergence across Nations and Regions in East Asia

Using the Gross Regional Domestic Product data for 10 East Asian countries, this study shows that East Asia as a whole tends to converge to each other in terms of per capita income. If Northeast Asia is separately considered, there is far stronger evidence in favor of real growth convergence. This result suggests that the prospect for furthering economic and monetary integration in East Asia is not so gloomy. Despite such convergence trend, however, there are still relatively wider income disparities among regions and nations in East Asia than within Europe, suggesting that a common effort to reduce the income gap is needed for deeper integration

Destined to Fail? The History of the Yen Bloc before the Second World War

The formation of yen bloc did not result in the economic and monetary integration of East Asian economies. Rather it led to the increasing disintegration of East Asian economies. Compared to Japan, Asian regions and countries had to suffer from higher inflation. In fact, the farther the countries were away from Japan, the more their central banks had to print the money and the higher their inflations were. Moreover, the income gap between Japan and other Asian countries widened. It means that the regionalization centered on Japanese yen was destined to fail, suggesting that the Co-prosperity Area was nothing but a strategy of regional dominance, not of regional cooperation. The impact was quite long lasting because it still haunts East Asian countries, contributing to the nourishment of their distrust vis-à-vis Japan, and throws a shadow on the recent monetary and financial cooperation movements in East Asia. This experience highlights the importance of responsible actions on the part of leading countries to boost regional solidarity and cohesion for the viability and sustainability of regional monetary system

Destined to Fail? The History of the Yen Bloc before the Second World War

The formation of yen bloc did not result in the economic and monetary integration of East Asian economies. Rather it led to the increasing disintegration of East Asian economies. Compared to Japan, Asian regions and countries had to suffer from higher inflation. In fact, the farther the countries were away from Japan, the more their central banks had to print the money and the higher their inflations were. Moreover, the income gap between Japan and other Asian countries widened. It means that the regionalization centered on Japanese yen was destined to fail, suggesting that the Co-prosperity Area was nothing but a strategy of regional dominance, not of regional cooperation. The impact was quite long lasting because it still haunts East Asian countries, contributing to the nourishment of their distrust vis-à-vis Japan, and throws a shadow on the recent monetary and financial cooperation movements in East Asia. This experience highlights the importance of responsible actions on the part of leading countries to boost regional solidarity and cohesion for the viability and sustainability of regional monetary system

Renormalization group theory for percolation in time-varying networks

Motivated by multi-hop communication in unreliable wireless networks, we present a percolation theory for time-varying networks. We develop a renormalization group theory for a prototypical network on a regular grid, where individual links switch stochastically between active and inactive states. The question whether a given source node can communicate with a destination node along paths of active links is equivalent to a percolation problem. Our theory maps the temporal existence of multi-hop paths on an effective two-state Markov process. We show analytically how this Markov process converges towards a memory-less Bernoulli process as the hop distance between source and destination node increases. Our work extends classical percolation theory to the dynamic case and elucidates temporal correlations of message losses. Quantification of temporal correlations has implications for the design of wireless communication and control protocols, e.g. in cyber-physical systems such as self-organized swarms of drones or smart traffic networks.Comment: 8 pages, 3 figure

Whither East Asian economic integration? Korea’s regionalization cum globalization strategy

The earlier version of this paper was originally presented at the seminar Korea and Europe at the Crossroad organized by GSIS, Seoul National University and GEM, Sciences-Po held at Paris on October 18, 2010.The recent regionalization in East Asia can be defined in terms of regionalization cum globalization. In the case of Europe, regionalization was originally intended to create a preferential and protected area. From its inception, however, regionalization in East Asia emphasized open membership and global liberalization. This so-called open regionalism was then adopted as a fundamental principle of the Asia-Pacific Economic Cooperation (APEC). Given that APEC is an inter-regional institution, however, the concept of open regionalism is not applicable to characterize exclusively Asian integration process that gained momentum on the basis of the ASEAN + 3 framework. For many East Asian countries, a regionalization initiative, especially after the 1997 financial crisis, was a natural response to cope with globalization. Indeed, although East Asian economies are increasingly regionalized, the global market remains crucial and exclusively Asian arrangements are still rare. Globalization and regionalization processes are mutually reinforcing. Singapore is one example that developed into a regional economic hub through the regionalization cum globalization strategy. Given that Korea concluded recently two important free trade areas with the USA and the EU, Korea is also capable of building such a regional economic hub. The first step is to strengthen a cooperation network between the three Northeast Asian countries, China, Japan, and Korea. This network, together with ASEAN, is expected to catalyze the regional integration in East Asia and shape its future evolution.This work was supported by the Korea National Research Foundation Grant (KRF-2009-362-A00001). The author thanks two referees of the journal for their very helpful comments and advices.

(Effects of Current Forward Market Intervention in the Korean Currency Crisis)

This paper investigates the effect of the exchange market interventions of the Bank of Korea on the exchange rate of Korean won vis-a-vis US dollar during the 1997 currency crisis. In particular, this paper tests the effects of spot and forward market interventions, using daily intervention data of the Bank of Korea. During the 1997 period, Korea faced two series of crisis in January-March and September-November. It turns out that the spot market intervention was effective in stabilizing the spot market exchange rate at least during the first crisis period. In contrast, there seemed no effect of the forward market intervention. Forward market intervention was rather destabilizing through forward exchange rate during the second crisis period. This implies that even though the forward and sterilized spot market interventions are equivalent in their effect on exchange rate, these two instruments can widely diverge from each other under the circumstances of exchange rate volatility and speculation

"A Basket Currency for Asia" - Edited by Takatoshi Ito

The definitive version is available at www3.interscience.wiley.comEver since the outbreak of the currency crisis in East Asia in 1997, there have been continuing meetings and dialogues among East Asian countries to further regional monetary and financial cooperation. Many important questions have been addressed and some agreements reached, resulting in concrete achievements such as the Chiang Mai Initiative (CMI). There is, however, little agreement yet about the appropriate exchange rate regime for East Asia, although it is a crucial matter given the increasing interdependency among Asian countries. A Basket Currency for Asia deals with this issue. Arguing that the dollar peg was the root cause of the Asian currency crisis, it is suggested in the book that the currency basket system based on the US dollar, euro, and Japanese yen (possibly together with some Asian currencies) is the most desirable for Asian countries. The book is an important study with strong policy implications for East Asia. However, do the ideas in this book truly represent the views of those in all East Asian countries? Indeed, there is reason to doubt this because all the papers, contributed only by Japanese authors, ignore the alternative basket system composed of Asian currencies only. Before I examine this point in detail, it is worthwhile summarizing the main content of the book.

Asian Monetary Cooperation: Lessons from the European Monetary Integration

With the recent currency crises accompanied by the launch of the euro, interest in Asian monetary cooperation is increasing. In fact, interdependent Asian economies are in good condition to support it. If Asian monetary cooperation happens, Japan is expected to playa leading role given its economic importance in the region. The currencies of Asian countries can be in one way or another linked to the Japanese yen. The question is whether Japan would be willing to assume its full responsibility as the key currency country. There is, however, little hope that Japan will take this role in the near future as the current proposal for an AMF does not include any hint of a lender of last resort, which has been such a precious asset to the viability of European monetary integration