Abstract
This chapter explores the need for and prospects of institutionalized cooperation, principally between the United States and Japan, over basic macroeconomic phenomena such as exchange rates and capital controls. This chapter makes three arguments: First, that cooperation between states over exchange rates is inherently difficult. Further, there is a need for an institution to supervise such cooperation—there will be a suboptimal amount of cooperation if states are left to bargain among themselves in an uncoordinated fashion. Second, that there is also a need for institutionalized cooperation to oversee and supervise the flow of international capital (unrelated to the fact that this in turn would also enhance the prospects for exchange rate cooperation). Third, that efforts to institutionalize cooperation over exchange rates, and especially measures to regulate the flow of capital, are very likely to fail due to conflicting political interests and economic ideologies on the part of the United States and Japan. In particular (and again, especially with regard to capital flows), the United States will remain opposed to new institutional arrangements.
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Notes
John Maynard Keynes, A Treatise on Money: The Applied Theory of Money (Cambridge: Cambridge University Press, 1971 [1930]), p. 272.
See Kenneth A. Oye, Economic Discrimination and Political Exchange: World Political Economy in the 1930s and 1980s (Princeton: Princeton University Press, 1992).
Robert V. Roosa, The United States and Japan in the International Monetary System, 1946–1985 ( New York: Group of Thirty, 1986 ), p. 1;
Robert C. Angel, Explaining Economic Policy Failure: Japan in the 1969–71 International Monetary Crisis ( New York: Columbia University Press, 1991 ), p. 38.
Volcker and Gyohten, Changing Fortunes (New York: Times Books, 1992), pp. 244, 268, 285;
Yoichi Funabashi, Managing the Dollar: From the Plaza to the Louvre ( Washington: Institute for International Economics, 1988 ).
William Grimes, Unmaking the Japanese Miracle: Macroeconomic Politics 1985–2000 (Ithaca: Cornell University Press, 2001), pp. 125, 132.
Ronald McKinnon and Kenichi Ohno, Dollar and Yen: Resolving Economic Conflict between the U.S. and Japan (Cambridge: MIT Press, 1997), pp. 10, 205 on successive U.S. pressure for yen appreciation.
See Hongying Wang, “China’s Exchange Rate Policy in the Aftermath of the Asian financial crisis,” in Jonathan Kirshner, ed., Monetary Orders: Ambiguous Economics, Ubiquitous Politics (Ithaca: Cornell University Press, 2003), pp. 153–172.
Dani Rodrik, “Who Needs Capital Account Convertibility?” in Should the IMF Pursue Capital Account Convertibility?: Essays in International Finance ( Princeton: Princeton University Press, 1998 ), p. 61.
Mark Beeson, “Mahathir and the Markets: Globalization and the Pursuit of Economic Autonomy in Malaysia,” Pacific Affairs, Vol. 73, No. 2 (2000): 339, 348.
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© 2007 G. John Ikenberry and Takashi Inoguchi
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Kirshner, J. (2007). Money, Capital, and Cooperation in the Asia-Pacific Region. In: The Uses of Institutions: The U.S., Japan, and Governance in East Asia. Palgrave Macmillan, New York. https://doi.org/10.1057/9780230603547_8
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DOI: https://doi.org/10.1057/9780230603547_8
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