Thursday, December 09, 2010
[IWS] ADB: ASIA ECONOMIC MONITOR [7 December 2010]
IWS Documented News Service
Institute for Workplace Studies----------------- Professor Samuel B. Bacharach
School of Industrial & Labor Relations-------- Director, Institute for Workplace Studies
16 East 34th Street, 4th floor---------------------- Stuart Basefsky
New York, NY 10016 -------------------------------Director, IWS News Bureau
Asian Development Bank (ADB)
ASIA ECONOMIC MONITOR [7 December 2010]
Emerging East Asia—A Regional Economic Update 1
Recent Economic Performance 4
Growth and Inflation 4
Balance of Payments 10
Financial Markets and Exchange Rates 13
Monetary and Fiscal Policy 16
Financial Vulnerability 19
Economic Outlook, Risks, and Policy Issues 29
External Economic Environment 29
Regional Economic Outlook 37
Risks to the Outlook 42
Policy Issues 43
Exchange Rate Cooperation: Is East Asia Ready? 46
What are Current Exchange Rate Arrangements in the Region? 47
Why Cooperate on Exchange Rates? 49
What are the Options for Regional Exchange Rate Cooperation? 52
What are the Initial Steps Toward Regional Exchange
Rate Cooperation? 55
1. Has Fiscal Policy Worked for ASEAN-5? 26
2. How Did Europe Tighten Cooperation on Exchange Rates? 58
Press Release 7 December 2010
Emerging East Asia's Strong Recovery Suggests It Is Time to Look at Currency Cooperation - ADB Report
HONG KONG, CHINA - Governments and monetary authorities in emerging East Asia need to cooperate more on exchange rates and other policies to turn the swift post-crisis recovery into more balanced, long-term growth.
"Regional exchange rate cooperation - if handled wisely - can ensure intra-regional exchange rate stability while allowing inter-regional flexibility; thus helping promote intra-regional trade and investment, and rebalance the region's sources of growth," said the special section of the latest edition of ADB's Asia Economic Monitor released today.
Emerging East Asia's large, long-standing trade surpluses against developed economies' increasing debt have raised tensions culminating in calls for emerging East Asia to allow its currencies to appreciate to match its growing economic strength. Asia's swift recovery from the recent global crisis is also drawing foreign investment to the region. Managing capital inflows to prevent asset price bubbles has also become a concern.
"Rapidly growing interdependence in trade and finance and the increasing importance of spillovers and contagion effects within the region make regional exchange rate cooperation essential," said Iwan Azis, Head of ADB's Office of Regional Economic Integration that prepared the report. "At the same time, regional currency flexibility against major currencies outside the region would help emerging East Asia better manage capital flows and respond to external shocks."
The Asia Economic Monitor suggests the best way forward would be for East Asian economies to adopt informal monitoring zones for their exchange rates against an external reference currency or a basket of currencies. Any big shift outside those non-binding zones would prompt confidential discussions to reduce deviations. Over time these arrangements could become more formal.
The report assesses the outlook for emerging East Asia, which comprises the 10 economies of the Association of Southeast Asian Nations, plus the People's Republic of China (PRC); Hong Kong, China; Republic of Korea; and Taipei,China.
The report notes that the weaker outlook for the global economy coupled with the phasing out of fiscal and monetary stimulus within the region means economic growth in the region should moderate next year.
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