The economics and politics of monetary regionalism in Asia

Abstract

This article discusses the political economy context surrounding the Japanese proposal for an Asian Monetary Fund and highlights other recent initiatives towards enhanced monetary regionalism. The discussion reveals the keenness that the region has shown towards intensified co-operation in these areas. Nevertheless, the economic/political economy rationale for such co-operation does not appear to have been fully articulated, a void that this article attempts to fill. Insofar as "regional contagion" is seen as providing the analytical basis for monetary regionalism, a large part of the discussion is devoted to defining and highlighting the various transmission channels through which currency and financial crises may spread contagiously, and drawing out policy implications thereof.