Download *Stability* and *Instability* Determinants of International Monetary

‘Stability’ and ‘Instability’ Determinants of
International Monetary Cooperation : An Evolution
from ‘CMI’ TO ‘CMIM’ and from ‘CMIM’ to
Elsewhere
Designing Social Inquiry
HAN Daehee
I33011
Submitted on June 2, 2014
A Puzzle
• A Puzzle : why hasn’t CMIM evolved into a ‘regional’
monetary union just as European countries had succeeded in
gradually developing EMS (European Monetary System) into
EMU (European Monetary Union)?
• Two issues which can be contrasted with my puzzle must be
considered at the same time.
- ASEAN+3 countries succeeded in creating CMI to react actively
against either the currency crisis of 1997.
- Although it did take so long for ASEAN+3 countries to evolve
CMI into CMIM which built up a multilateral monetary
cooperation from bilateral currency swap, why institutional
functions of CMIM and the total amount of contribution to it
expand?
A Research Question
• Under what conditions and extent can international
monetary ‘cooperation’ succeed in achieving an
evolution into a higher institutionalized framework
such as CMIM of East Asia or fail to do so?
The Existing Explanations (1)
• Three Channels of the Existing Explanations regarding
the International Monetary Relations
- How domestic currency regime choice can be decided and it
can have distributional consequences
- How appropriate level of exchange rate [to appreciate or
depreciate] can be determined.
- How the international political economy of exchange rate
policy can affect ‘coordination’ or ‘cooperation’ in international
monetary relations.
• Main focus of this research
- ‘Coordination’ and ‘cooperation’ literatures.
The Existing Explanations (2)
• ‘Coordination’ Literature
- Definition : an interaction among governments whose
principal challenge is for national policies to converge on a
focal point
- For example, ‘coordination’ of states can be applied when
Simply choosing to link national currencies to gold or to the
dollar, in which the mutual adjustment of policies is
unnecessary.
- Frieden and J. Lawrence Broz : “Virtuous circle” and
“Vicious circle”
Existing Explanations (2)
• Cooperation Literature
- International monetary relations may require more than
simple convergence around a visible anchor and indeed may
call for the resolution of more serious problems of
cooperation.
- In other words, fixed-rate systems may only be stable when
governments actively choose to cooperate with one
another.
Existing Explanations (3)
• Cooperation Literature by Benjamin Cohen
- What stimulates international monetary cooperation?
1) A shared interest in currency stability
2) Linkage to other policies
3) The institutionalized nature of interstate cooperation
4) Numbers
5) Environmental economic conditions
Variables
• One Independent Variable
- IV1 : The Degree of Socialization among the ASEAN+3 countries
• Two Dependent Variables
- DV1 : Success in creating and implement International
Monetary ‘cooperation’ in East Asia
- DV2 : Failure to create and implement International Monetary
‘cooperation’ in East Asia
• Research Objective
- Although the Degree of Socialization cannot explain everything
on international monetary cooperation in East Asia, this research
wants to testify how much the degree of socialization might
impact on success or failure to create and implement the
evolution from CMI to CMIM.
Two Hypotheses and An Equation
• Two Hypotheses and an Explanatory Equation
for This Research
-
-
Hypothesis 1: If ‘socialization’ among ASEAN+3 countries
lead them to commit to the ‘institutional’ framework they
designed, the creation and implementation of international
monetary ‘cooperation’ is likely to be activated in East Asia.
Hypothesis 2: If ‘socialization’ among ASEAN+3 countries
doesn’t lead them to commit to the ‘institutional’ framework
they designed, international monetary ‘cooperation’ such as
CMIM is not likely to be sustained and failed in East Asia.
• An Explanatory Equation for this Research
- F(The Degree of IMC in East Asia) = a*(The Degree of
Socialization)
* IMC = International Monetary Cooperation
‘Socialization’
: the Scope and Analytical Framework(1)
• processes and outcomes shaped by ‘socialization’ among the
states can create and implement different ‘environments’ that
national interests can be adjusted in international affairs.
The Third Assumption of Constructivists: National interests are
decided by social construction processes of identity, and national
interests and identity dynamically change, interacting with each other
under the continual political processes.
• Although still national interests and strategic calculations of
realists are quite dominant, at least ‘states’ somehow can have
potentials in reshaping calculations of whether states should
plug in the international ‘cooperative’ frameworks for the long
term.
•
By assessing how ‘human agreement’ and ‘reshaped social construction’ can
influence on ‘behavior’ in terms of the main ‘states’ related to an evolution
from ‘CMI’ to ‘CMIM’ such as four dimensions including China, Japan, Korea, and
ASEAN countries.
‘Socialization’
: The Scope and Analytical Framework(2)
Actual Interaction
•A shared interest in stability
•Institutionalized Nature : Differences of
National Monetary Policies
• Issue Indivisibility among the States
• Macroeconomic Conditions
• The Number of Principal Members
Contextual Settings
[Processes & Distribution of
Gains]
•An ‘Enforcement’ in PD Game
•A ‘Communication’ in SH game
•A ‘Distribution’ in BS Game
•Creation of CMI
•Evolution from CMI to CMIM
•Hesitation of the Evolution from
CMIM to Somewhere?
Outcomes of Socialization
TEST (1)
• Research Objective
-Rather than proposing This research seeks to testify
how ‘socialization’ that principal members reshape and
socially construct can affect the creation and
implementation of international monetary cooperation
such as CMIM in East Asia.
• Methodologies
– One case study
– Processing-tracing will be adopted.
– Two temporal criteria: a period of East Asia Currency
Crisis from 1997 to 2007 and the other period of Global
Financial Crisis from 2008 up to Now.
TEST (2)
•
The Importance of this research : Theoretical Dimension
-
First, this research seeks to find out how political leaders could interact, reshape their
own interests.
Second, How principal states came up with some ideas to commit or hesitate to
commit to the CMI or CMIM can be found out.
Third, finding out why implementation frameworks of international monetary
cooperation were changed from bilateral (Bilateral Currency Swap) to multilateral one
(Multilateral Currency Swap Agreement) is also meaningful one.
• The Importance of this research : Methodological Dimension
-
Although the number of case to observe is the only one, the evolution from
CMI to CMIM, it can be separated into two cases related to the ‘crisis’
according to the temporal dimensions.
– At the same time, by explaining ‘the only one independent variable’,
‘socialization’ with three dimensions, observations related to the case can be
also increased in order to accrue meaningful insights and implications.
TEST (3)
• Sophistication of an Independent Variable
– This independent variable should be analyzed with three
analytical frameworks such as contextual settings, actual
interaction process and distributed gains, and ‘outcomes’ of
socialization.
– One of the existing explanations that Benjamin Cohen (2001)
indicated gives some standards on what stimulates
international monetary cooperation.
• A Shared Interest in Stability
• Institutionalized nature : Different National Monetary
Policies
• Linkage to Other policies(Issue Indivisibilities)
• Macroeconomic conditions: Crisis or Boom?
• The Number of Participants
TESTS (4)
• Modification of Analytical Framework
–
In the East Asian context, linkage to other policies seems not to
explain how CMI was evolved into CMIM because in the East Asian
context, Japan and China have the biggest ownership and influence
in this governance structure evolved from CMI to CMIM.
– Fierce competitions between two countries are basically derived from
not linkage to other policies but issue indivisibilities such as
territorial disputes and Chinese consumer’s boycott not to buy
Japanese imports.
– According to James Fearon, some issues, by their very natures,
simply will not admit compromise. Fierce conflicts between two
countries can arrive at the level in that war-prone international issues
may often be effectively indivisible, but the cause of this indivisibility
lies in domestic political and other mechanisms rather in the nature
of the issues themselves.
TESTS (5)
• Issue Individualities
– Indicator C was adjusted from Linkage to Other policies into
Issue Indivisibilities at the expense of testing how fierce
competitions between Japan and China can undermine
international monetary cooperation in East Asia and slow
down the evolution of regional monetary cooperation from
CMI to CMIM and from CMIM to a highly ‘institutionalized’
form of international monetary cooperation.
• Conclusion
– In this process-tracing methodology and ‘socialization’
framework, stability determinant [which factor involved in this
‘socialization’ can contribute to the success] and instability
determinant [which factor involved in this ‘socialization’ can
contribute to the failure] can be distinguished to obtain some
implications for the historical dependence toward the
future of ‘CMIM’.