Use of National Currencies for Trade Settlement in East Asia : A Proposal

Despite a few landmark achievements such as the Chiang Mai Initiative, financial deepening and monetary integration in East Asia has been slow. Meanwhile, proliferation of FTAs and China's successful accession to the WTO have enabled faster progress on trade integration among the East Asian economies. Building on the expanding intra- regional trade, we suggest creation of a multilateral currency arrangement where some of the national currencies could be used for trade settlement within the cooperative framework of ASEAN 3. This would facilitate closer financial integration and greater flexibility of the Asian currencies against the US dollar without being kept captive by the slow progress in capital account liberalization in some countries