Hanging Together? On Monetary and Financial Cooperation in Asia1

In Asia, the idea of wider monetary and financial cooperation has been in the air since the crisis of 1997-8. The spread of monetary instability following the devaluation of the Thai baht highlighted the extent to which one country’s problems could have destabilizing repercussions for its neighbors. There was the perception that the events of 1997-8 had been compounded by the large positions of highly-leveraged institutions in New York and the less-than-generous assistance and conditionality of multilateral financial institutions in Washington, D.C. More than a few observers were led to conclude that Asian governments should take steps to create a zone of monetary and financial stability better insulated from these influences. The response has been schemes of varying scope and ambition for cooperation in the region. Least ambitious are plans to build on already extant arrangements such as the APEC Finance Ministers Process (a venue for sharing information on regional financial developments and pursuing cooperative programs to promote financial-sector development and liberalization), the Executives Meeting of East Asia and Pacific Central Banks (which is designed to encourage regional surveillance and financial market development), and the Six Markets Group or G-4 + 2 (a venue for the exchange of views among the vice ministers of finance and deputy central ban