You are not permitted to access the full text of articles.
If you have any questions about permissions,
please contact the Society.
νμλμ λ Όλ¬Έ μ΄μ© κΆνμ΄ μμ΅λλ€.
κΆν κ΄λ ¨ λ¬Έμλ ννλ‘ λΆν λλ¦½λλ€.
|[ Article ]|
|Seoul Journal of Economics - Vol. 33, No. 3, pp.437-479|
|ISSN: 1225-0279 (Print)|
|Print publication date 31 Aug 2020|
|Received 13 Jul 2020 Revised 25 Jul 2020 Accepted 25 Jul 2020|
|Plausibility of Local Currency Contribution to the CMIM|
Soyoung Kim ; Woongji Im
|Soyoung Kim, Professor, Department of Economics, Seoul National University, 1 Gwanak-ro, Gwanak-gu, Seoul 08826, Republic of Korea, Tel: +82-2-880-2689 (firstname.lastname@example.org)|
|Woongji Im, Doctoral Candidate, Department of Economics, Seoul National University, 1 Gwanak-ro, Gwanak-gu, Seoul 08826, Republic of Korea (email@example.com)|
Funding Information ▼
JEL Classification: F15, F33, F26, F55
This study assesses the plausibility of local currency contribution to the Chiang Mai Initiative Multilateralization (CMIM) arrangement. First, we investigate the (net) demand for local currencies in foreign exchange reserves because introducing local currency contribution is efficient only when sufficient demand exists. The main results are as follows. i) Substantial demand exists for local currencies in foreign exchange reserves. ii) The size of the demand for local currencies in foreign exchange reserves is large in comparison with the size of the maximum withdrawal from CMIM. iii) Net demand for local currencies in CMIM tends to be positive. Second, the stability of local currencies is analyzed by calculating the exchange market pressure index because costs of local currency contribution to CMIM arrangements can be high if local currencies are unstable. The results suggest that several currencies of ASEAN+3 members are as stable as popular non-U.S. international currencies for various sub-periods. The results in terms of stability of the currency, internationalization of currency, and liberalization of capital account transactions, indicate that the Japanese yen, Chinese yuan, and Korean won could first be considered eligible for local currency contribution to CMIM arrangements. Overall, the results may support the idea of introducing local currency contribution to CMIM arrangements.
|Keywords: Local currency contribution, CMIM, Demand for local currencies, Stability of currency, Exchange market pressure index, ASEAN+3, Foreign exchange reserves
Financial support from AMRO is acknowledged. The research was a part of the research project on “Local Currency Contribution to the CMIM.” The findings, interpretations, and conclusions expressed in this material represent the views of the author(s) and are not necessarily those of the ASEAN+3 Macroeconomic Research Office (AMRO) or its member authorities. Neither AMRO nor its member authorities shall be held responsible for any consequence of the use of the information contained herein. We would like to thank an anonymous referee for valuation comments and suggestions.
|1.||Aizenman J. and Binici, M. “Exchange Market Pressure in OECD and Emerging Economies: Domestic vs. External Factors and Capital Flows in the Old and New Normal.” Journal of International Money and Finance 66 (2016): 65-87.
|2.||Aizenman J. and Lee, J, “International reserves: precautionary versus mercantilist views, theory and evidence.” Open Economies Review 18 (2007): 191–214.
|3.||Aizenman J., Lee, J., and Sushko, V. “From the Great Moderation to the Global Crisis: Exchange Market Pressure in the 2000s.” Open Economies Review 23 (No. 4 2012): 597-621.
|4.||Aizenman J. and Marion, N. “The high demand for international reserves in the Far East: What is going on?” Journal of the Japanese and International Economies 17 (No. 3 2003): 370-400.
|5.||Ben-Bassat, A. and Gottlieb, D. “Optimal international reserves and sovereign risk.” Journal of international Economics 33 (Nos. 3–4 2012): 345-362.
|6.||Calvo, GA., Izquierdo, A., Loo-Kung, R. “Optimal holdings of international reserves: self-insurance against sudden stop.” NBER Working Paper No. 18219 (2012).
|7.||Cheung, YW. and Ito, H. “A cross-country empirical analysis of international reserves.” International Economic Journal 23 (No. 4 2009): 447-481.
|8.||Cheung, YW. and Qian, X. “Hoarding of international reserves: Mrs Machlup's wardrobe and the Joneses.” Review of International Economics 17 (No. 4 2009): 824-843.
|9.||Dooley, MP., Folkerts-Landau, D. and Garber, P. “An Essay on the Revived Bretton Woods System.” NBER Working Paper No. 9971 (2003).
|10.||Edison, H. “Are foreign exchange reserves in Asia too high?” World Economic Outlook, September 2003 (2003): 78-92.|
|11.||Fernandez, A., Klein, M.W., Schindler, M., and Uribe, M. "Capital Control Measures: A New Dataset." IMF Economic Review 64 (No. 3 2016): 548-574.
|12.||Flood, R. and Marion, N. “Holding international reserves in an era of high capital mobility.” IMF Working Paper No. 02/62 (2002): 1-53.
|13.||Girton L., and Roper, D. “A Monetary Model of Exchange Market Pressure Applied to the Postwar Canadian Experience.” American Economic Review 67 (1977): 537-548.|
|14.||Heller, H.R. “Optimal International Reserves.” Economic Journal 76 (N. 302 1966): 296-311.
|15.||International Monetary Fund. “Assessing Reserve Adequacy.” IMF Policy Paper, February (Washington: International Monetary Fund) (2012).|
|16.||Kaminsky, G., Lizondo, S., and Reinhart, C. “Leading Indicators of Currency Crisis.” IMF Staff Paper 45 (No. 1 1998): 1-48.
|17.||Kaminsky, G., and Reinhart, C. “The Twin Crisis: The Causes of Banking and Balance-of-Payments Problems.” American Economic Review 89 (No. 3 1999): 473-500.
|18.||Klaassen, F., and Jager, H. “Definition-Consistent Measurement of Exchange Market Pressure.” Journal of International Money and Finance 30 (No. 1 2011): 74-95.
|19.||Maziad, S., Farahmand, P., Wang, S., Segal, S., and Ahmed, F., directed by U. Das and I. M. y Lago, “Internationalization of Emerging Market Currencies: A Balance between Risks and Rewards.” IMF Staff Discussion Note, SDN/11/17 (2011).
|20.||Obstfeld, M., Shambaugh, JC. and Taylor, AM. “Financial stability, the trilemma, and international reserves.” American Economic Journal: Macroeconomic 2 (No. 2 2010): 57-94.
|21.||Sachs, J.D., Tornell, A., and Velasco, A. “Financial Crisis in Emerging Markets: The Lessons from 1995.” Brookings Papers on Economic Activity 1 (1996): 147-215.
Editorial Office, Seoul Journal of Economics, Institute of Economic Research, Seoul National University 599 Gwanangno, Gwanak-gu, Seoul 151-746, Korea
Tel: +82-2-880-5434 | Fax: +82-2-888-4454 | E-mail: firstname.lastname@example.org
Copyright (c) 2020 SJE. All rights reserved.