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Regional currency settlements in East Asia : Risks and tasks for Korea

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  • Regional currency settlements in East Asia
  • Korea Institute for International Economic Policy


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Title Regional currency settlements in East Asia
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Sub Title

Risks and tasks for Korea

Material Type Reports
Publisher

[Sejong]:Korea Institute for International Economic Policy

Date 2014-12
Series Title; No KIEP Staff Papers / 14-07
Pages 25
Subject Country Eastern Asia(Asia and Pacific)
South Korea(Asia and Pacific)
Language English
File Type Link
Subject Economy < Financial Policy
Holding KIEP

Abstract

East Asian Countries has developed the financial cooperation via CMIM, ABMI after the Asian
currency crisis. Lee and Park 2014) and Rhee and Sumulong (2014) advocate the use of local
currencies in trade settlements. The regional currency settlements will reduce the USD dependency
in the regional economy, so it will promote financial stability in the region. But they might induce
risks for Korean economy. Korea’s trade accounts are deficit with Middle East and Japan and
surplus with other regions. Most USD settled trade surplus comes from trades with China and
ASEAN. Therefore, if the regional currency settlement increases in East Asia, then USD settled
surplus would be shrunk considerably since the trade deficit with Middle East still would be settled
in USD. The increased interconnection of regional economy may speed up the spread of financial
crisis if it happens in the region. (The rest omitted)