Euro at Ten Preview Chapter 3
3 Regional Perspectives East Asia C. RANDALL HENNING East Asia provides a crucial test of the euro’s attractiveness as an interna- tional currency outside Europe’s own neighborhood. This paper compares the roles of the euro and dollar in the region and their prospects. Although I consider myself an early and consistent supporter of the Economic and Monetary Union (EMU), I do not predict a rapid increase in the role of the euro in East Asia. The international role of its currency is not the most important test of the success or failure of a monetary union. Such a role for the euro would not necessarily benefit Europe, moreover, because it car- ries costs as well as benefits. However, examining the international role of the euro is important to understanding the operation and stability of the international monetary system. The following sections address the overall prospects for the euro, approaches to understanding currency use in East Asia, the recent empirical record, and the relevance of Asian regionalism. These treatments are followed by a brief conclusion. Overall Prospects for the International Role of the Euro The advent of the EMU created an alternative to the dollar that is poten- tially more attractive than any of the European “legacy” currencies or the Japanese yen. When asked about this in the 1990s, Lawrence Summers, C. Randall Henning is visiting fellow at the Peterson Institute for International Economics and a member of the faculty at American University. He has written on international monetary coopera- tion, Asian regional integration, and Europe’s monetary union, including most recently articles on the exchange rate policy of the euro area (Henning 2007a, 2007b).
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