In this paper, I discuss on the costs and benefits of the establishment of the currency union. The theoretical possibility of the establishment of the currency union raised by Mundell(1961) was realized by the success of the EMS and EMU in Europe. As Europe successfully settle down the currency union, the positive evaluation of the future European economy are anticipated and this makes a catalyst in discussing the establishment of the currency union in East Asia. The reason behind Europe was dedicated to establish the currency union is that the corresponding profit is anticipated.
This paper also examines the economic suitability of the major East Asia countries, China, Japan and Korea, for forming a monetary union. I compare their meets of OCA criteria to those of the major EMU members, Germany, France and Italy during the period before their circulating euro. I find that, although some economic indicators are agreeable, China, Japan and Korea don not appear to be economically suitable for monetary cooperation.
I review the future evolution of the Asian currency arrangements from broader perspectives, including the experience with the European Currency Unit (ECU). The experience with the ECU suggests that a successful Asian currency unit requires preconditions including the firm political commitment, market-wide expectations of the eventual currency unification, and existence of well-functioning financial markets as well as cross-border payment/settlement systems. We can learn further from the fact that the ECU was handicapped by a lack of cash currency, which led to its limited use in commercial transactions, and inadequacies of settlement arrangements.
Historically, regional economic integration has been led by both economic and political motives. What matters most in seeking economic and monetary integration is the political will to do so rather than the economic incentive to do so. Korean government needs to prepare for achieving ACU, finally currency union.
동아시아 통화통합과 ACU의 역할(Currency union and ACU in East Asia)
서울 : 한국금융연구원
|Series Title; No||KIF 금융리포트|
|Subject Country||South Korea(Asia and Pacific)|
|Subject||Economy < Financial Policy|
|Holding||한국금융연구원; KDI 국제정책대학원|