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Seoul Journal of Economics - Vol. 33 , No. 4

[ Article ]
Seoul Journal of Economics - Vol. 33, No. 3, pp.437-479
Abbreviation: SJE
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 (
Woongji Im, Doctoral Candidate, Department of Economics, Seoul National University, 1 Gwanak-ro, Gwanak-gu, Seoul 08826, Republic of Korea (

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.

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