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A Monetary Union in Asia? Some European Lessons

In: Future Directions for Monetary Policies in East Asia

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  • Charles Wyplosz

    (The Graduate Institute of International Studies)

Abstract

Monetary Union in Europe has been the natural response to the combined desire of stabilizing intra-European exchange rates and of lifting permanently all capital controls. The commitment to stable exchange rate has long been rooted in policymakers' conviction that trade integration requires precise rules which eliminate the risk of misalignments, whether imposed by the markets or arranged by the authorities. The success in maintaining fixed-but-adjustable exchange rates within the EMS and next in adopting a single currency is largely due to the patient and progressive building institutions that became the uneasy repository of those parts of national sovereignty that have been abandoned. This experience suggests three lessons for current discussions about a monetary union in Asia. First, multilateral regional exchange rate arrangements are more conducive to an effective defense than indirect approaches like basket pegs. They probably require some limits to capital mobility. Second, adopting a single currency necessitates elaborate preparations that can only be underpinned by the gradual build up of collective institutions. Third, a monetaryMonetary Union in Europe has been the natural response to the combined desire of stabilizing intra-European exchange rates and of lifting permanently all capital controls. The commitment to stable exchange rate has long been rooted in policymakers' conviction that trade integration requires precise rules which eliminate the risk of misalignments, whether imposed by the markets or arranged by the authorities. The success in maintaining fixed-but-adjustable exchange rates within the EMS and next in adopting a single currency is largely due to the patient and progressive building institutions that became the uneasy repository of those parts of national sovereignty that have been abandoned. This experience suggests three lessons for current discussions about a monetary union in Asia. First, multilateral regional exchange rate arrangeme
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Charles Wyplosz, 2001. "A Monetary Union in Asia? Some European Lessons," RBA Annual Conference Volume (Discontinued), in: David Gruen & John Simon (ed.),Future Directions for Monetary Policies in East Asia, Reserve Bank of Australia.
    • Handle: RePEc:rba:rbaacv:acv2001-08
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    File URL: https://www.rba.gov.au/publications/confs/2001/pdf/wyplosz.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    European Union; monetary union; east Asia; EMU; EMS; Maastricht; exchange rate stability; optimum currency area (OCA); institution;
    All these keywords.

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F52 - International Economics - - International Relations, National Security, and International Political Economy - - - National Security; Economic Nationalism
    • F59 - International Economics - - International Relations, National Security, and International Political Economy - - - Other

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