Economic Preconditions for Monetary Integration in East Asia


Asian Financial Crisis gave a devastating impact on East Asian countries, which had been enjoying good economic performance.  As a result, there emerged various initiatives for monetary cooperation in order to avoid the next crisis in the region. However, there are pros and cons on the regional financial integration and cooperation in Asia.  Some argue that in order to avoid the next Asian Financial Crisis, Asian countries must closely united with each other, and others argues that regional attempts, whether financial cooperation or trading arrangement, may undermine the global efforts. In view of the above, the purpose of this paper is to examine whether East Asian countries (or subset of them) constitute a preferable grouping for monetary cooperation and integration. I examine the degree of interdependence of East Asia in terms of trade, labor and macroeconomic variables.  The results of the examination suggest that economic preconditions for monetary integration are met, and there is indeed a case for financial integration and cooperation in East Asia. 

Junichi GOTO
Research Institute for Economics and Business Administration
Kobe University
Rokkodai-cho, Nada-ku, Kobe
657-8501 Japan
Phone: (81) 78 803 7036
Fax: (81) 78 803 7059