Search

This paper evaluates the viability of a monetary union or optimum currency area (OCA) in East and South-East Asia. Previous studies have mainly focused on a single aspect of integration, which has led to contrary findings. We adopt several alternative approaches that cover fiscal, output, and price aspects to accomplish the objective. As the synchronization of business cycle is a key prerequisite for forming an OCA, we test the level of business cycle synchronization among the countries of this region. The results of synchronization testing appear favorable, thus, strengthening the argument for forming a monetary union. Our analysis also shows that the regional shock is a dominating factor determining output movements in these countries. Next, we use a generalized purchasing power parity (G-PPP) procedure to test the long-run interrelationship among bilateral real exchange rates. Our findings based on bilateral real exchange rates indicate that the vital macroeconomic variables that determine real exchange rates, such as trade, finance, and price movements, are highly associated in the region. We also find that the short-run adjustment speed is sufficiently large for most exchange rates, barring a few. Consequently, we show that most economies in the region are sufficiently integrated to form a monetary union at any time. [ABSTRACT FROM AUTHOR]

This paper examines whether international capital mobility in Asia has increased after the 1997 Asian financial crisis by estimating the Feldstein-Horioka (FH) coefficients using panel cointegration and dynamic OLS regressions. In the benchmark estimation, we find that the FH coefficients of ten Asian economies decrease significantly from 0.65 during the pre-crisis period to 0.32 during the post-crisis period. Furthermore, the coefficient for the post-crisis period is less statistically significant than that for the pre-crisis period. The extended model estimations with additional control variables controlling for the business cycle, different foreign exchange rate systems, and capital control also show the results which are consistent with the benchmark estimation results. Rolling regressions show a consistently declining trend of the FH coefficients in Asia during our sample period. These results provide consistent evidence, according to the FH proposition, of increasing international capital mobility in Asia during the post-1997 Asian financial crisis period. ( JEL F36, F37, F21) [ABSTRACT FROM AUTHOR]

The Global Financial Crisis of 2008 and the Asian Financial Crisis of 1997-1998 have a common trait, that is any shock to the financial system or market system can cause the system or market to flip from one state to another state. [ABSTRACT FROM AUTHOR]

The article discusses the results of a study regarding the transmission of world shocks to emerging-market (EM) countries Asia and Latin America. The study showed that exchange rate regimes and restrictions on capital flows are the crucial factors in assessing the discrepancies in the transmission of shocks across EM countries. It also concludes that regional groups and trade openness are not important in determining the transmission of business cycles.

This paper argues that, apart from exchange-rate aspects, the East Asian economic crisis has looked very similar to a domestic banking crisis arising from boom and bust cycles in bank lending and capital investment. One of the key determinants of the boom-bust cycle in East Asia was the sharp appreciation of the yen against the dollar between the mid-1980s and the mid-1990s, and its subsequent depreciation. Real investment and speculative financial capital within and into East Asia responded too much to the yen movements. The paper also discusses factors behind large medium-term movements in the yen-dollar rate. [ABSTRACT FROM AUTHOR]