Regional Monetary Cooperation in East Asia against Asymmetric Responses to the US Dollar Depreciation

Abstract

In this paper we consider a regional monetary cooperation in East Asia after we look at recent movements of exchange rates of East Asian currencies and exchange rate policies in East Asian countries. We regard that the recent movements of exchange rates have been related with their reactions to the US dollar depreciation that has been caused by the current account deficit of the United States and changes in capital flows between the United States and the rest of the world. We found that East Asian currencies were classified into at least two groups; one group’s currencies have been appreciated against the US dollar while the other’s currencies have been pegged to the US dollar. We stress coordination failure in exchange rate policies among East Asian countries that causes biased change in exchange rates among the intra-regional currencies. It is necessary to make regional coordination in exchange rate policies for a desirable exchange rate system in East Asia. At last, we suggest some policy recommendations related with regional cooperation in exchange rate policies in East Asia.

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