Is Economic Development Promoting Monetary Integration in East Asia?

Zhi-Qian Wang,Kentaro Kawasaki

doi:10.3390/ijfs3040451

Abstract

This paper tries to investigate whether there exist international integrated markets among East Asian economies, by employing the Generalized Purchasing Power Parity (G-PPP) model, then, it would help to suggest whether the East Asian region is the Optimum Currency Area (OCA) or not. The empirical results in this paper suggest that holding the G-PPP among nine Asian countries (China, Indonesia, Japan, Korea, Malaysia, the Philippines, Singapore, Thailand and Vietnam) becomes more applicable in 2000–2013 than of that in 1984–1997. In the period of “globalization,” which is characterized by expansion of world trade, increase of international capital flows, and development of information and communications technologies, Asian economic development has been promoting not only economic integrations but also constructing the stable linkages of real exchange rates. Therefore, it would help to adopt regional coordination for monetary policies to assure the feasibility of a possible monetary union.

Highlights

It is well known that each of the East Asian countries considered here experienced rapid economic growth across two separate periods of development
The second period of growth has been experienced in the twenty-first century. It can be described as a century of “globalization,” which is characterized by the expansion of world trade, the increase of international capital flows, and the development of information-communication technologies
The question arises as to whether economic growth promotes the monetary integration by moving away from monetary “localization” to monetary “regionalization”. This paper investigates this issue by employing the Generalized Purchasing Power Parity (G-PPP)

Summary

Introduction

It is well known that each of the East Asian countries considered here experienced rapid economic growth across two separate periods of development. ASEAN countries, four newly-industrializing countries (NIEs), and Japan, whose economy grew faster than almost all other economies from the mid-1960’s until the early 1990’s Most of their economic achievements, in particular a rapid increase in GDP per capita, were based on maintaining macroeconomic stability with sound financial markets, providing government-backed supports for key industries, and maintaining sound fiscal and public policies. The second period of growth has been experienced in the twenty-first century It can be described as a century of “globalization,” which is characterized by the expansion of world trade, the increase of international capital flows, and the development of information-communication technologies. These new growth factors led to spillover effects on developing countries in East Asia. The question arises as to whether economic growth promotes the monetary integration by moving away from monetary “localization” to monetary “regionalization”

Methods

Discussion

Conclusion