Jeong, Dong-Kuen

Abstract
The East Asian economy is ripe for a shift toward regional integration in response to the rise of the Chinese economy and developing regionalism on the heels of the 1997 Asian currency crisis. China, Japan and Korea have been promoting a free trade agreement, while Japan and China are in competition to secure leadership within the region. The launch of the World Trade Organization in 1995 indicates that most countries around the world are taking active roles in regional economic integration. However, East Asian countries have only recently been involved in a few free trade agreements, while capital flows are now global, with businesses depending much more than ever before on foreign investment. The deficiencies in East Asian economic organization are real and have to be corrected if the region is to prosper in an increasingly global economy. Granted there are serious economic and political constraints to the creation of an Asian regional institution. Huge disparities in the level of economic development among East Asian countries would make it more difficult for them to form some type of regional trade arrangement let alone to create some type of regional financial institution. The Asian financial crisis stirred up debate and led to a number of proposals for institutional reform, which resulted in a network of swap agreements. The East Asian countries should create their own monetary institution. This paper explores the linkages between the Chiang Mai Initiative and Asian monetary arrangements, which shield the East Asian countries from the erratic fluctuations in the currencies of the global market. It is significant and timely to consider creating a common Asian currency for East Asian monetary coordination, in order to have a desirable exchange rate system that can cope with any possible currency crisis for the East Asian countries in the long run. Developing deeper and more diverse financial markets, together with the arrangement of an Asian Monetary Fund and/or a common Asian currency would provide security against volatile exchange markets.
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