Gordon de Brouwer

Financial markets, institutions and integration in East Asia

East Asia has enormous scope to upgrade and integrate its financial markets, covering the spectrum of equity, bond, foreign-exchange, and derivatives markets. Financial markets and institutions in East Asia tend to be narrow and undeveloped, although there are important exceptions. Japan dominates the top tier of the regions markets by virtue of its size, but its markets are not advanced, and many of its private institutions are weak. Although the markets in Australia, Hong Kong SAR, and Singapore are smaller than those of Japan, they are more innovative, market-oriented, and technologically advanced. Markets in Malaysia, South Korea, Taiwan, and Thailand have made substantial progress to varying degrees; but China, Indonesia, and the Philippines have a considerable way to go in developing the information and governance infrastructure that financial markets need to function well. For all these countries, there is a clear role for regional cooperation among policymakers in building capacity in, and links between, financial markets in East Asia, as well as in encouraging stable speculation and the participation of nonresident and institutional investors in domestic financial markets. ASEAN+3 is an important and welcome advance in regional cooperation, but its membership does not span the depth of experience in financial markets and institutions that exists in East Asia.

Financial Markets and Policies in East Asia

1. Gordon de Brouwer Debating Financial Markets and Policies in East Asia2. Dominic Wilson Recent Developments in Asian Financial Markets3. Sang Whan Kim, Haesik Park and Hae Wang Chung Patterns of Bank Intermediation and Structure: a Korean Perspective4. Ramkishen S. Rajan and Reza Siregar Private Capital Flows in East Asia: Boom, Bust and Beyond5. Masahiro Kawai Bank and Corporate Restructuring in Crisis-Affected East Asia: From Systemic Collapse to Reconstruction6. Mari Pangestu and Manggi Habir The Boom, Bust and Restructuring of Indonesian Banks7. Fan Gang Financial Market Liberalization and Economic Stability in China8. David Nellor Securing Consistency in Macroeconomic Policy9. Reuven Glick Fixed or Floating: is it Still Possible to Manage in the Middle?10. Guy Debelle The Viability of Inflation Targeting for Emerging Market Economies11. C. E. V. Borio and Robert N. McCauley Comparing Monetary Policy Operating Procedures in Indonesia, Korea, Malaysia and Thailand12. Gordon de Brouwer Does a Formal Common-Basket Peg in East Asia Make Economic Sense?13. Eisuke Sakakibara Subregional Currency Union - Japan and Korea14. Mark Crosby and Glenn Otto An Australia-New Zealand Currency Union

A New Financial Market Structure for East Asia: How to Promote Regional Financial Market Integration

East Asia’s capacity to secure strong and stable economic growth depends on, among other things, a secure foundation of well functioning financial markets, institutions and systems. In general, the region’s financial markets are relatively weak, undeveloped and unsophisticated, although there are exceptions, notably Japan, Singapore, Hong Kong and Australia. The region’s financial institutions are also generally weak, again with a number of exceptions. Not only are the banking sectors of some of the crisis-affected economies still heavily burdened by the fallout from the financial crises of 1997 and 1998, but most banks in China and Japan are overwhelmed by nonperforming loans. Furthermore, domestic markets and institutions in the region are not well integrated with each other.

'Towards improved monetary policy in Indonesia': a comment

This comment argues that inflation-focused policy is appropriate for Indonesia but that it should be directed at underlying inflation over the medium term. It contends that McLeods monetarist explanation of inflation in Indonesia is unsatisfactory in theory and is not consistent with the evidence: traded goods prices rose before, and substantially more than, non-traded goods prices during the crisis of 1997–98, which is not consistent with the monetarist view that inflation was caused by excessive base money growth.This comment argues that inflation-focused policy is appropriate for Indonesia but that it should be directed at underlying inflation over the medium term. It contends that McLeods monetarist explanation of inflation in Indonesia is unsatisfactory in theory and is not consistent with the evidence: traded goods prices rose before, and substantially more than, non-traded goods prices during the crisis of 1997–98, which is not consistent with the monetarist view that inflation was caused by excessive base money growth.

Capital market reform in Asia : towards developed and integrated markets in times of change

Preface Introduction I: DEVELOPMENT OF CAPITAL MARKETS IN ASIA Banks and Financial Intermediation in Emerging Asia: Reforms and New Risks - M S Mohanty and Philip Turner How to Develop Capital Markets in East Asia - Andrew Sheng II: ISSUES OF CAPITAL MARKET REFORM Capital Market Reform in Malaysia - Zarinah Anwar Non-tradable Share Reform in the Peoples Republic of China - Xinghai Fang Trends and Best Practices in Shaping OECD Public Debt Management and Government Securities Markets - Hans J Blommestein Ten Years After: Implications of the Current Financial Market Turmoil - Atchana Waiquamdee Facing the North-Atlantic Financial Crisis: A European Perspective - Hans-Helmut Kotz III: EMERGING RISKS AND CHALLENGES OF REGULATION, SUPERVISION, AND CORPORATE GOVERNANCE Corporate Governance: An IOSCO Perspective - Jeremy Cooper Governance of and by Institutional Investors in the OECD Area - Stephen Lumpkin Restoring Trust in Financial Markets - Stephen Grenville Financial Sector Supervision: What We Have Learned So Far - Stephen Grenville Investor Protection in the Asia Pacific: Survey Findings of the Asia-Pacific Regional Committee - Lynn Hew and Mohammad Nizam Ismail The Elephant in the Room: The Need to Deal with What Banks Do - Adrian Blundell-Wignall, Gert Wehinger, and Patrick Slovik IV: REGIONAL CO-OPERATION AND INTEGRATION OF CAPITAL MARKETS IN ASIA A New Financial Market Structure for East Asia: How to Promote Regional Financial Market Integration - Gordon de Brouwer and Jenny Corbett The Integration of Capital Markets in the Asian Region: Some Practical Steps Forward - Gordon de Brouwer and Lorraine Allan The Asian Bond Fund-2 and Regional Initiatives - Thirachai Phuvanatnaranubala The Role of Capital Markets in Infrastructure Financing - Worapot Manupipatpong Index