Monetary regionalism: regional integration without financial crises

The financial crises of the late 1990s have marked a watershed for the global economy and for regionalism. Prior to these crises, deregulation and liberalisation, in particular of financial markets, enjoyed widespread support. On the other hand, regional integration was aimed at improving conditions for regional trade and was based on Bela Balassa’s forty year old theory of regional integration. At the beginning of the 21st century, the theoretical approach to regional integration will have to be a different one. Regionalism will have to offer enhanced protection against financial crises, whereas trade liberalisation in an era of rapid trade liberalisation both offers fewer benefits and may be too complicated to implement due to high administrative costs associated in particular with free trade areas. The aim of this paper is to provide a theoretical framework for the emerging new monetary regionalism. Regions that wish to strengthen their co-operation in monetary and financial affairs today have the option of regionalism without trade agreements. East Asia is the most likely candidate for the implementation of monetary regionalism, also because East Asian policy makers continue to be frustrated with the lack of progress in the IMF’s reform process