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The paper aims to assess the influence of the heterogeneity of financial institutions in the relationship between bilateral trade and the monetary integration process in East Asia. I used a structural gravity model with similarity of currency regimes, and I introduced a variable of heterogeneity of financial institutions derived from the World Bank Financial Development and Structure Dataset. The main hypothesis is that the more heterogeneous financial institutions are, the less bilateral trade there is. The results show a negative relationship between trade and the heterogeneity of the financial institutions. A secondary hypothesis is that the potential positive effects of the monetary integration diminish after the introduction of the variable depicting the heterogeneity of financial institutions. The similarity of currency regimes has a negative effect on bilateral trade and that effect increases with the presence of the heterogeneity of financial institutions variable. I made a second estimation concerning 184 countries and territories. The results confirmed the negative and significant relationship between the heterogeneity of the financial institutions and trade. The recent reform plans of ASEAN countries should also consider these aspects, which are not limited to financial integration problems. [ABSTRACT FROM AUTHOR]

The role of China in East Asia's recovery from the recent global financial and economic crisis highlights China's position as an engine of growth for this region. From the viewpoint of China, there are many potential gains from entering into free trade agreements (FTAs) with its neighbors, who collectively form a large and fast-growing market. In this paper, we qualitatively and quantitatively assess the four main permutations of China's FTAs with East Asian major economies: China-ASEAN, China-Japan, China-Korea and ASEAN+3. We compare the effects of these FTAs on China's output and welfare. Our comparative analysis shows that China will gain from all three bilateral FTAs, while gaining the most from the ASEAN+3. Because forming a region-wide FTA, such as the ASEAN+3, is expected to be gradual and difficult, China should continue to engage in bilateral FTAs as a medium-term and alternative strategy. However, in the long term, China should pursue a region-wide FTA. [ABSTRACT FROM AUTHOR]

Since the Asian financial crisis in 1997, many financial cooperative arrangements among the ASEAN +3 countries have been formed to facilitate policy coordination and to prevent another crisis from adversely affecting East Asia. This paper focuses on regional surveillance cooperation, which has been regarded as a pre-requisite for deeper financial cooperation including bilateral swap arrangements under Chiang Mai Initiatives. Although East Asian states have acknowledged the significance of the regional surveillance mechanism in the midst of the crisis, which could facilitate information sharing and frank discussion of potential risks in the region, it showed little progress until very recently. What explains this unsuccessful regional surveillance cooperation given the initial enthusiasm and widely-acknowledged need for it? This article takes seriously domestic implementation capacities and enforcement problems on a regional level. It argues that member states are discouraged from exchanging frank views on other states' financial conditions because they expect that even non-intrusive policies would not necessarily be successfully implemented in those countries where sufficient domestic regulatory and supervisory capacities are lacking. Moreover, regional surveillance cooperation had troubles in enforcement: the norm of non-interventionism, lack of independent regional agencies and staff that could monitor and enforce compliance, and lack of transparency. In these circumstances, current surveillance mechanisms are likely to become a stumbling block for deeper financial integration in East Asia until serious efforts are made to tackle problems with enforcement. [ABSTRACT FROM AUTHOR]

Although economically interdependent, political rivalry between Japan and China have brought about the inability of the Association of Southeast Asian Nations Plus Three (APT) process to transform itself into an East Asia Summit (EAS) as originally envisioned. The existence of the APT and the EAS as two separate entities not only reflected the politico-security rivalry between the two neighbours but more importantly affected the direction and progress of East Asian regionalism as a whole. Aiming to provide a historical account of the EAS process and examine Japan's role in the development of the EAS framework, this paper argues that Japan has put greater attention on the EAS and made numerous unilateral initiatives to develop it. While Japan does not seek ultimate power, it considers the EAS as an excellent opportunity to: (i) raise its influence in the region vis-à-vis China; (ii) elevate the status of the EAS in region-building and (iii) check Chinese advances by fulfilling its long-held policy of having other Asia Pacific countries, primarily Australia and New Zealand, join. Nevertheless, the decision to expand the EAS to include the USA and Russia will have some adverse effects on Japan's unilateral ambitions and the furtherance of regionalisation processes. [ABSTRACT FROM AUTHOR]

By assessing the sustainability of regional trade agreements (RTAs) for East Asia, we quantitatively evaluate the likely impact of proposed East Asian RTA strategies on the East Asian economies and the world economy with respect to consumption, production, volume of trade and terms of trade effects by applying a multi-country and multi-sector computable general equilibrium model. These strategies include: (i) the ASEAN Free Trade Area (AFTA: a being-left-alone strategy); (ii) an ASEAN Hub RTA (a hub-and-spoke type of overlapping RTA strategy); (iii) the AFTA versus a China–Japan–Korea RTA (a duplicating or competing RTA strategy); and (iv) an ASEAN+3 RTA (an expansionary RTA strategy). We find that an expansionary ASEAN+3 RTA could be a sustainable policy option because the members’ gains would be significantly positive, with more equitably distributed gains between members than when using other strategies. The effect on world welfare would also be positive and the negative effect on nonmembers would not be very strong. More interestingly, if the East Asian countries cooperate with Pacific Basin countries to form an APEC-level RTA, such as a free trade area of the Asia-Pacific, the extension of the regional trade bloc might be considered a more desirable policy option than the proposed East Asian RTAs for East Asian economies, even though countries excluded from the free trade area of the Asia Pacific are worse off. [ABSTRACT FROM AUTHOR]

The article analyzes the initiatives of Indonesia to reform the rules and norms of ASEAN member countries to secure regional stability and create order in East Asia. Topics discussed include the non-interference principle for ASEAN and its importance for security and stabilization, consensus-based decision-making rule, the ASEAN charter-drafting process, post-Cyclone Nargis crisis management and liberal democratic principles.

Japan's outward direct investment ( ODI) began to show an obvious expansion since 2005, accompanied by a greater importance in East Asia and in the manufacturing sector. By analyzing the new wave of Japanese ODI, three points are elaborated in this article. First, the recent Japanese ODI did not result in the same industry to be passed from one country to another as elucidated in the flying geese model. Instead, Japan's ODI only promoted the regional divisional of labor in the transport equipment and electrical machinery industries. Second, this study advances the theory of vertical production network by exploring two regional production networks constructed by Japanese ODI, including one between China, South Korea, Taiwan, and Hong Kong and the other between the Association of Southeast Asian Nations ( ASEAN). Finally, since Japan's economy has been tightly connected with foreign demand via overseas production, this article argues that any sign of Japan's declining ODI will have serious impact to its domestic economic prosperity. © 2015 Wiley Periodicals, Inc. [ABSTRACT FROM AUTHOR]