The Idea of an “Asian Monetary Fund”: The Problems of Financial Institutionalism in the Asia-Pacific

Asian observers attribute the Asian economic crisis of 1997–1999 to the instability inherent in the global financial system. In response, Asians have discussed creating an Asian Monetary Fund (AMF) to manage future financial crises and have demanded the reform of the global financial architecture. However, the New International Financial Architecture (NIFA) developed since the crisis fails to address the fundamental sources of instability in the present global financial system. This system poses economic and ideological threats to the stability of East Asia. Therefore, regional states have powerful incentives to create an effective AMF. However, traditional security concerns, historical grievances, and political rivalries between the major Asia-Pacific powers limit the prospects of regional cooperation. Under these conditions, it is unlikely that East Asian states can create an effective regional financial institution. However, Asian states still need to protect themselves from global financial volatility. They will probably pursue this goal through bilateral and multilateral arrangements with the regional powers. The Asia-Pacific will maintain a distinctive East Asian political economy.