Chiang Mai Initiative Multilateralization Research Articles

Penguatan Kerjasama ASEAN Plus Three (APT) untuk Penanganan dan Mitigasi Dampak Negatif Ekonomi dari Pandemi Covid-19

This study will discuss efforts to strengthen ASEAN Plus Three (APT) cooperation in dealing with the mitigation of negative economic impacts resulting from the Covid-19 pandemic which will be explained using the concept of Economic Regionalism. The scope of this research is limited to the policies carried out by ASEAN Plus Three (APT) to help maintain economic and financial stability, as well as new breakthroughs in the digital economy in the Southeast Asia region. The results of this study are that the policies undertaken by APT in dealing with negative economic impacts are divided into three, namely the Chiang Mai Initiative Multilateralization (CMIM), Macroeconomic Research Office (AMRO), and the Asian Bond Market Initiative (ABMI). The strengthening of regional cooperation has had a positive impact on efforts to recover the economy in the Southeast Asia region.

Institutionalizing Financial Cooperation in East Asia

Abstract Since the 1997 Asian financial crisis, East Asia’s ASEAN+3 states have built the second-largest regional emergency liquidity fund in the world, the Chiang Mai Initiative Multilateralization (CMIM). With a total commitment of $ 240 billion to aid member states facing a currency crisis, CMIM can provide more funds to members than the International Monetary Fund (IMF). Nonetheless, CMIM continues to be functionally subordinate to IMF decisions. This may now be changing following the 2011 creation of the ASEAN+3 Macroeconomic Research Office (AMRO) as a regional mechanism to manage surveillance and design of CMIM lending programs. The ability to delegate surveillance and program design to an independent body is a crucial prerequisite to ending CMIM’s subordination to the IMF, and AMRO seeks to ensure such autonomy through its institutional design. This article analyzes AMRO’s progress toward autonomy, using indicators of effective delegation drawn from organizational theory and newly available information and data on AMRO.

Toward an Asian Monetary Fund: Ideas for Transition

Creation of an Asian Monetary Fund might be a way to improve the financial safety net in Asia. This paper presents ideas for reforming the Chiang Mai Initiative Multilateralization (CMIM)—and its sister organization the ASEAN+3 Macroeconomic Research Office (AMRO)—to move Asia in that direction. Among the ideas presented are making the CMIM an international treaty-type organization with paid-in capital, improving indigenous surveillance and monitoring capacity and developing a conditionality framework, merging the CMIM and the AMRO, and creating new functions for a regional stability mechanism such as macroeconomic stabilization. Much of the analysis focuses on Europe, which may have lessons to teach on matters such as transparency and accountability, the dangers of an improperly designed monetary union, the role of the IMF in the global financial safety net, the importance of regional leadership, and the necessity of taking into account local conditions in designing new institutions or initiatives.

Comments on Toward an Asian Monetary Fund: Ideas for Transition

June 01 2020 Comments on Toward an Asian Monetary Fund: Ideas for Transition Author and Article Information Online Issn: 1536-0083 Print Issn: 1535-3516 © 2020 by the Asian Economic Panel and the Massachusetts Institute of Technology2020Asian Economic Panel and the Massachusetts Institute of Technology Asian Economic Papers (2020) 19 (2): 78–80. https://doi.org/10.1162/asep_a_00758 Cite Icon Cite Permissions Share Icon Share Facebook Twitter LinkedIn MailTo Views Icon Views Article contents Figures & tables Video Audio Supplementary Data Peer Review Search Site Citation Comments on Toward an Asian Monetary Fund: Ideas for Transition. Asian Economic Papers 2020; 19 (2): 78–80. doi: https://doi.org/10.1162/asep_a_00758 Download citation file: Ris (Zotero) Reference Manager EasyBib Bookends Mendeley Papers EndNote RefWorks BibTex toolbar search Search Dropdown Menu toolbar search search input Search input auto suggest filter your search All ContentAll JournalsAsian Economic Papers Search Advanced Search Helmut Wagner, University of Hagen and Center for East Asia Macroeconomic Studies: This is a well-written paper with a clear message: Asia is special. Asia has gained in economic importance. Asia is not adequately reflected in the actions and quota regulations of international financial organizations. Therefore, Asia needs better financial arrangements of its own to protect itself from possible future financial crises. This in turn means that it should decouple itself from the West / IMF (at least in the medium to long term). To start with, the Chiang Mai Initiative Multilateralization (CMIM) should be fundamentally reformed and lead to an Asian Monetary Fund (AMF), possibly in the longer term also creating a separate common Asian currency. The experiences in Europe could serve as illustrative material in this context. In Section 2, the authors describe the reasons they see for a fundamental reform of the financial arrangements in Asia and... You do not currently have access to this content.

Leaving the Nest: The Rise of Regional Financial Arrangements and the Future of Global Governance

ABSTRACTThis article examines the impact of regional financial arrangements (RFAs) on the global liquidity regime. It argues that the design of RFAs could potentially alter the global regime, whether by strengthening it and making it more coherent or by decentring the International Monetary Fund (IMF) and destabilizing it. To determine possible outcomes, this analysis deploys a ‘middle‐up’ approach that focuses on the institutional design of these RFAs. It first draws on the rational design of institutions framework to identify the internal characteristics of RFAs that are most relevant to their capabilities and capacities. It then applies these insights to the interactions of RFAs with the IMF, building on Aggarwal's (1998) concept of ‘nested’ versus ‘parallel’ institutions, to create an analytical lens through which to assess the nature and sustainability of nested linkages. Through an analysis of the Chiang Mai Initiative Multilateralization (CMIM) and the Latin American Reserve Fund (FLAR), the article demonstrates the usefulness of this lens. It concludes by considering three circumstances in which fault lines created by these RFAs’ institutional design could be activated, permitting an institution to ‘leave the nest’, including changing intentions of principals, creation of parallel capabilities and facilities, and failure of the global regime to address regional needs in a crisis.

Comment on “Changing International Financial Architecture: Growing Chinese Influence?”

Comment on “Changing International Financial Architecture: Growing Chinese Influence?”

Strengthening ASEAN+3 Regional Financial Arrangements: A New Framework Beyond CMIM

This paper examines the operational limitations of the Chiang Mai Initiative Multilateralization (CMIM) as a regional financial safety net in East Asia and presents a new regional financial arrangement. To overcome the drawbacks of the Chiang Mai Initiative Multilateralization which has never been activated so far, this study proposes that ASEAN+3 establish a new lending facility, so-called a Reserve Fund Facility, and create a regional common reserves asset. The proposed Reserve Fund Facility framework guarantees lending automaticity of the liquidity facility, based on upfront funding instead of pledge funding. Establishing the Reserve Fund Facility could find a way of making up for weakness of the Chiang Mai Initiative Multilateralization and responding to the regional needs for effective regional financial arrangement. The full-fledged Reserve Fund Facility will ultimately contribute to the future development of East Asia’s monetary and financial cooperation beyond the Chiang Mai Initiative Multilateralization.

Strengthening ASEAN 3 Regional Financial Arrangements: A New Framework Beyond CMIM*

This paper examines the operational limitations of the Chiang Mai Initiative Multilateralization (CMIM) as a regional financial safety net in East Asia and presents a new regional financial arrangement. To overcome the drawbacks of the Chiang Mai Initiative Multilateralization which has never been activated so far, this study proposes that ASEAN 3 establish a new lending facility, so-called a Reserve Fund Facility, and create a regional common reserves asset. The proposed Reserve Fund Facility framework guarantees lending automaticity of the liquidity facility, based on upfront funding instead of pledge funding. Establishing the Reserve Fund Facility could find a way of making up for weakness of the Chiang Mai Initiative Multilateralization and responding to the regional needs for effective regional financial arrangement. The full-fledged Reserve Fund Facility will ultimately contribute to the future development of East Asia's monetary and financial cooperation beyond the Chiang Mai Initiative Multilateralization.

A Proposal for a New Regional Financial Arrangement: The Reserve Liquidity Line

This paper examines the limitations of the Chiang Mai Initiative Multilateralization (CMIM) as a regional financial safety net in East Asia, and proposes a new regional financial arrangement. To overcome the drawbacks of the CMIM, which has never been activated so far, a new regional financial arrangement suggests that ASEAN 3 members establish a regional reserve system based on a supranational regional reserve asset. The new regional financial arrangement, so-called “Reserve Liquidity Line” (RLL), guarantees a degree of automaticity in liquidity facility, based on upfront funding instead of pledge funding. As a backdrop of the regional reserve system, some market movements have been manifested to reduce excessive U.S. dollar dependency in East Asia and to enhance the use of local currencies. Establishing the RLL mechanism could find a way of making up for the weak points of the CMIM and responding to the regional needs for effective regional financial arrangements. The proposed operational mechanism of RLL comprises (i) institution building of ASEAN 3 Reserves System (ARS) to manage the Regional Reserves Asset (RRA), (ii) an Operations Account and a Substitution Account, and (iii) a sort of basket exchange rate for RRA valuation.

Comments by Anwar Nasution, on The Economics of RMB Internationalization

Anwar Nasution: It is my pleasure to comment on this excellent paper on the important topic of analyzing the People’s Republic of China’s (PRC) reforms over the past decade to move toward internationalizing the Renminbi (RMB). The RMB is beginning to be used as an international medium of exchange in dominating and setting cross-border trade and financial transactions. The paper summarizes the benefits and costs of RMB internationalization from a theoretical point of view. There are also econometric studies on the impacts of RMB internationalization on financial development in the PRC and the estimate of seigniorage revenue of RMB, but there is no estimate on the inflationary tax enjoyed by the PRC from foreign holdings of its currency. In addition, internationalization of the RMB allows the PRC to borrow from the international community with liabilities denominated in that currency without exchange rate risk. Unfortunately, there are no brief summaries of PRC government policies on how to make the RMB become an international unit of account, medium of exchange, and store of value. Also there is no information provided in the paper on the size of capital markets in the PRC: the structural financial system, the size of public sector debt and security market, and their liquidity.

From the Chiang Mai Initiative to an Asian Monetary Fund

In the aftermath of the Asian financial crisis of 1997-98, East Asian finance ministers launched several new initiatives for regional financial cooperation including: (i) regional economic surveillance; (ii) a regional liquidity support arrangement; and (iii) Asian bond markets initiative. This paper evaluates the progress of such initiatives—particularly the Chiang Mai Initiative Multilateralization (CMIM)—and explores the possible evolution of the CMIM toward an Asian Monetary Fund (AMF). The paper argues that for an AMF to emerge, East Asian authorities need to strengthen regional surveillance and upgrade their capacity to formulate independent conditionality in the event of crisis lending so that the CMIM can be delinked from IMF programs. The paper also makes a case for more flexible use of CMIM when the type of external shock that affected the Republic of Korea in the fall of 2008 following the Lehman collapse hits Asia once again in the future. Given capital inflow risks, the paper suggests the authorities to prepare for exchange rate policy coordination—through intensive policy dialogue—to better manage macroeconomic and financial conditions while keeping intraregional exchange rate stability. An Asian Currency Unit should be developed to facilitate such policy dialogue for exchange rate policy coordination. Acknowledgment: This paper is prepared for the conference on the Future Global Reserve System organized by Columbia University in partnership with ADB and ADBI in Tokyo on 17-18 March 2010. It is a revised version of the discussion paper presented for the first phase of the ADB International Monetary Advisory Group (IMAG) meeting held in New York, 16-17 September 2009. The findings, interpretations, and conclusions expressed in the paper are solely the author's alone and do not necessarily represent the views of the Asian Development Bank, its Institute, their respective executive directors, or the countries they represent.

East Asian financial regionalism: why economic enhancements undermine political sustainability

East Asian financial regionalism was born in response to the Asian Financial Crisis of 1997–1998. The centrepiece of financial regionalism was the Chiang Mai Initiative (CMI), an emergency liquidity mechanism created by the ASEAN+3. It embodied both a clear interpretation of what had gone wrong in 1997–1998 and an understanding of the need for institutions that would be politically viable despite Sino-Japanese rivalry. Enforcement under CMI relied on the ‘IMF link’ – release of funds would be predicated on crisis countries' initiating negotiations with the International Monetary Fund (IMF), as a means of reducing moral hazard, enforcing conditionality and diverting blame from the leading creditors, Japan and China. The global financial crisis of 2008–2010 and the eurozone crisis that followed have inspired important changes meant to address CMI's economic gaps, including accelerated adoption of ‘CMI Multilateralization’ (CMIM), the creation of a new surveillance unit (ASEAN+3 Macroeconomic Research Organization, or AMRO), and the establishment of a new precautionary line. Many observers have remarked that these developments weaken the IMF link, which had effectively subordinated CMI to the IMF. While the moves appear to demonstrate a more confident, autonomous regionalism and a relative devaluation of the US-dominated global financial institutions, this paper argues that in fact, the ASEAN+3 states have again unearthed the underlying politics of divided leadership and mutual suspicion. CMIM is now threatened by the renewed potential for internal divisions. Further complicating the picture, both China and Japan have recently established large bilateral swap lines outside of the CMIM framework with several of their ASEAN+3 partners, raising the question of whether CMIM is moving towards political irrelevance even as it has arrived at a high water mark in its institutional development.

Co-chairing international negotiations: the case of the Chiang Mai initiative multilateralization

This paper studies the roles of co-chairs in international negotiations. This study attempts to fill the research gap by scrutinizing co-chairs' effectiveness, defined as an ability to shape agreement details in one's direction, to better understand chairs' and co-chairs' influence in negotiations. I argue that a co-chair's effectiveness is not a function of resource possession, but is rooted in its resource management, or ability to convert the existing resources into bargaining influence. To validate my argument, I analyze the Chiang Mai Initiative Multilateralization (CMIM) negotiation rounds from 2005 to 2010, focusing on the members' financial contributions and vote shares.

The Implications of U.S. Strategic Rebalancing: A Perspective from Thailand

The Implications of U.S. Strategic Rebalancing:A Perspective from Thailand Kitti Prasirtsuk (bio) President Obama's participation in the East Asia Summit (EAS) for a second consecutive year confirms the United States' heightened attention to and engagement with Asia. Earlier, many Asian observers had doubted that a U.S. president could remain committed to attending the annual summit, particularly when the 2012 meeting was hosted by Cambodia, a relatively small country in the Association of Southeast Asian Nations (ASEAN). The fact that Obama kept his commitment to attend the EAS is evidence that the United States is stepping up its rebalancing efforts in Asia. This essay offers a perspective from Thailand—a traditional U.S. ally—on the motivations behind U.S. rebalancing, as well as on the policy's implications for Thailand and Southeast Asia as a whole. U.S. Motivations As seen from Thailand, there are four major motives behind the United States' rebalancing strategy. The first two concern China, while the other two motives relate to policy reorientation in the United States itself. First, China has gained considerable influence in East Asia, thanks in part to its strong relations with ASEAN. China became a dialogue partner in 1991, and its constant participation in the ASEAN Regional Forum (ARF) since 1994 and in other subsequent regional cooperation schemes has enabled Beijing to play a key role in the region. Alongside Japan, China has also been instrumental in setting the agenda for the ASEAN +3 forum. Among the most prominent achievements of the ASEAN +3 is the Chiang Mai Initiative Multilateralization (CMIM), the currency swap scheme aimed to help member countries suffering from a financial crisis. As the world's largest foreign-reserves holder, China is a formidable partner in the CMIM. Further, Beijing has pledged support for the Initiative for ASEAN Integration (IAI) and other programs to improve logistics connectivity, including the construction of roads, bridges, river ways, and high-speed trains, which will further link southern China with ASEAN. [End Page 31] On the economic front, China-ASEAN trade surged from $7.6 billion in 1990 to $186.5 billion in 2009, and China has been ASEAN's biggest trade partner ever since.1 This strong relationship is largely the result of the China-ASEAN free trade agreement, which was agreed to in 2002 and went into full effect in 2010. In the socio-cultural realm, China participates in a number of exchange programs with ASEAN countries, and Beijing's so-called panda diplomacy has likewise been effective. After leasing a couple of pandas to Thailand a decade ago, China has recently made similar deals with Indonesia, Malaysia, and Singapore. Moreover, Chinese tourists have become top visitors to many ASEAN nations, including Thailand.2 In short, China-ASEAN relations have been strengthened in several areas spanning the political, economic, and socio-cultural realms. Against such a backdrop, the United States could not remain on the sidelines. Second, China has become more assertive in its external posture. As Aaron Friedberg observed in the July issue of Asia Policy, this increasing assertiveness has been manifest on a variety of fronts, including Beijing's defense of North Korea over the sinking of a South Korean vessel, its confrontation with Japan over the arrest of a Chinese fishing boat captain near disputed islands in the East China Sea, and intensifying territorial claims in the South China Sea.3 At the same time, China continues to enhance its military capabilities, as demonstrated in the development of stealth fighters and an aircraft carrier. Given the strength of the Chinese economy, the country's defense budget will only increase in coming years. Third, the lack of attention paid to Southeast Asia during the George W. Bush administration, which was largely preoccupied with the war on terrorism in the Middle East, generated unfavorable perceptions of the United States. In particular, regional states noted the consecutive absences of Secretary of State Condoleezza Rice at the ARF meetings. During the Obama administration, the United States has sought to re-engage with Southeast Asia through sending high-level envoys, including Secretary of State Hillary Clinton, to visit the region and attend multilateral forums such as the EAS...

Prevention and Resolution of Foreign Exchange Crises in East Asia

This paper discusses mechanisms to prevent and resolve foreign exchange crises in East Asia. Policies and mechanisms at the country level as well as regional and global levels are discussed. Policies at the level of a particular country to prevent foreign exchange crises include the management of short-term foreign currency liabilities, the adequacy of reserves, and managing episodes of rapid short-term capital inflows. The author discusses the development of regional mechanisms for crisis prevention and resolution in conjunction with the global mechanisms, including the Chiang Mai Initiative (CMI) and the Chiang Mai Initiative Multilateralization (CMIM). The author then suggests how the CMIM can evolve into an integrated crisis prevention and resolution mechanism for East Asia.

Institution Building for Macroeconomic and Financial Cooperation in East Asia

This paper discusses institution building for macroeconomic and financial cooperation in East Asia. The issues covered include the Chiang Mai Initiative Multilateralization (CMIM); the regional safety net mechanism that evolved from regional cooperation initiatives started after the 1997 financial crisis. A number of proposals are put forward to make the liquidity support role of the CMIM more effective. Other issues covered are regional economic surveillance; the role of the ASEAN+3 Macroeconomic Research Office (AMRO), which will support CMIM; how AMRO may evolve to become the Asian Monetary Organization; and how the Finance Ministers’ process can be integrated with the Central Banks’ process to create a more effective institutional structure for the region. JEL codes: E02, E44, F33, F36, F55

Comment on “Chiang Mai Initiative Multilateralization: Origin, Development, and Outlook”

Comment on “Chiang Mai Initiative Multilateralization: Origin, Development, and Outlook”

Chiang Mai Initiative Multilateralization: Origin, Development, and Outlook

This paper discusses the Chiang Mai Initiative Multilateralization (CMIM) – its origin, development, and outlook. The experiences of the 1997–1998 East Asian financial crisis that led to the creation of the Chiang Mai Initiative (CMI), the evolution of the Chiang Mai Initiative to become the CMIM, and the setting up of the ASEAN+3 Macroeconomic Research Office (AMRO) to support CMIM are reviewed. Proposals are made on how to make the liquidity support role of the CMIM more effective. These involve changing the International Monetary Fund link from that based on using more than a certain percentage of a country's CMIM quota to that based on the number of times the 90-day CMIM swap needs to be rolled over, supplementing the size of the CMIM through linked bilateral swaps, allowing “contributing partners” beyond the current CMIM members, and developing the effectiveness of AMRO and its evolution into an East Asian monetary organization.

Comment on “Chiang Mai Initiative Multilateralization: Origin, Development, and Outlook”

Comment on “Chiang Mai Initiative Multilateralization: Origin, Development, and Outlook”

Monetary integration in ASEAN+3: A perception survey of opinion leaders

Recently, the ASEAN+3 countries have taken a number of measures to bolster monetary integration. These include the establishment of the ASEAN+3 Economic Review and Policy Dialogue and the Chiang Mai Initiative Multilateralization (CMIM). More recently, the ASEAN+3 Macroeconomic Research Office (AMRO) was also established as an independent surveillance unit. Also, business cycles in the region are starting to become more synchronized. Policymakers have, however, not heeded to calls for introducing a regional monetary unit (RMU) to strengthen regional surveillance and to promote greater exchange rate coordination. Why and what are the practical issues and constraints in introducing the RMU? What actions could be taken in the short and the longer term to promote exchange rate coordination? This paper assesses the views of ASEAN+3 opinion leaders through a perception survey. The opinion leaders feel that RMU, CMIM, and AMRO could go a long way in deepening monetary integration in the region.