Is the European Exchange Rate Mechanism a Model for East Asia?
33 Pages Posted: 31 Oct 2010
Date Written: October 1, 2002
Abstract
The idea of an East Asian Economic Zone, while much talked about since the 1980s, showed few signs of becoming a reality as a result of economic diplomacy alone. In 1997, however, international capital markets treated East Asian economies as a distinct region as “contagion” swept from Thailand through Southeast and Northeast Asia. The sequential devaluations against the US dollar resulted in large changes in cross-rates against other East Asian currencies, straining regional trade and economic relationships. A regional exchange rate mechanism modeled on Europe’s might have permitted a less turbulent currency realignment in 1997 and arguably could work to facilitate adjustments portended by current global external imbalances. However, for geopolitical and economic reasons, it is hard to see the ERM model being readily transplanted; East Asia will likely have to evolve its own regional monetary cooperation framework.
Keywords: East Asia, ERM, exchange rate mechanism, regional economic coordination
JEL Classification: F33, F42
Suggested Citation: Suggested Citation