Information and Coordination: Towards East Asian Regional Financial Integration
118 Pages Posted: 16 Jul 2009 Last revised: 12 Sep 2009
Date Written: May 16, 2009
We study how economic institutions intertwine with political institutions. A theoretical study of a simple strategic complementary game with private and public information among partially informed agents such as central banks shows that initial fundamentals might give rise to different levels of transparency. An empirical study shows that both economic fundamentals such as the reserve ratio of broad money to foreign exchange reserves and non-economic fundamentals such as an occurrence of crisis and the level of democracy do affect transparency of central banks. We apply this analysis to study the coordination effect of information on the progress towards regional financial integration among East Asian countries. We find that the progress towards regional financial integration might rely more on polity rather than on economic fundamentals.
Keywords: E61, F15, P16
JEL Classification: Policy Coordination, Economics Integration, Political Economy
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