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How Financial Multilateralism Can Increase Sustainable Output, Employment, and Income in the Pacific Region
Published May 25, 2011
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Maturing of the Asian export experience has been accompanied by structural changes that will require a new generation of multilateral financial institutions and services. Emergence of unprecedented foreign exchange reserves is one expression of this unmet need, and these reserves have reinforced interest in a reexamination of Asian exchange rate management regimes. At the same time, Asia’s second generation of successful growth has made it increasingly apparent that intraregional purchasing power and savings offer essential sources of diversification from historic reliance on absorption and foreign direct investment (FDI) from Western economies that are members of the Organization for Economic Cooperation and Development (OECD). One prominent example is absorption by the People’s Republic of China (hereafter China), which has emerged in the past 10 years as a primary driver of Asian regional growth, and this absorption is increasingly driven by domestic demand, not export requirements. Meanwhile, Asian domestic savings have grown to levels that justify a much larger horizon of investment opportunity. In this paper, we discuss how greater financial integration can facilitate needed adjustments to help Asian economies, and the Pacific Basin generally, transit smoothly to higher levels of sustainable output, employment, and incomes.

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