A s i a n D e v e l o p m e n t B a n k I n s t i t u t e

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ADBI News 2010 Volume 4 Number 1

Time to Reform the Global Currency CONFERENCE

Reserve System?

The world is headed toward a multiple reserve currency system, and the challenge is to ensure stability during the transitory
period. ADB President Kuroda (far left), ADBI Dean Kawai, Nobel Laureate Joseph Stiglitz, and renowned economist Jeffrey Sachs
discuss the future of the global reserve system.

The global financial crisis has cast a range of Columbia University; Charles Wyplosz, director of
challenges to the world, including the future shape the International Center for Money and Banking
and reform of the global reserve system. A well- Studies at The Graduate Institute in Geneva;
functioning global reserve system is vital to Haruhiko Kuroda, president of ADB; Masahiro
international trade and capital flows, regional Kawai, dean of ADBI; and Jong-Wha Lee, chief
integration and cooperation, and sustainable
economic growth.
In this issue
The evolution of this system will have profound
implications for Asian economies. The region holds
over half of the worlds total foreign exchange
reserves, and is highly dependent on international
trade and capital flows for its prosperity.
The global crisis has also provided fresh
momentum to the long-standing issue of reforming
the global reserve system. It has sparked debate
among academics and policymakers on a number
of key questions: Is the current system unstable? Is
it inefficient? And what role did the US dollar-
dominated system play in the crisis?
Internationally recognized scholars explored
these questions with Asian and US researchers at
ADBI on 1718 March in Tokyo. The speakers
included Joseph Stiglitz, Nobel Laureate and
professor of economics at Columbia University;
Jeffrey Sachs, director of The Earth Institute at

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economist at ADB. The conference, The Future
Global Reserve SystemAn Asian Perspective,
was part of an ongoing research and technical
assistance project initiated by ADB and Columbia
Universitys Earth Institute.
Most participants agreed the US dollar will
remain the main reserve currency well into the
future, although with a diminishing weight. But the
world is headed toward a multiple reserve currency
system, and during the transition period the global
reserve system could be unstable. In the short run,
the euro will gain market share, especially in and
Post-crisis Issues: Views from Asia and Europe
The fifth Asia Europe Economic Forum (AEEF)
met on 25 March in Tokyo and was hosted by the
Japanese Ministry of Finance. The AEEF examined
post-crisis issues including economic recovery and
exit strategies, rebalancing growth, global currency
adjustments, and governance of the Group of 20
from both Asian and European perspectives.
Mr. Hiroshi Ogushi, Parliamentary Secretary for Finance,
Japan, gave welcome remarks at the AEEF this year.
Sustaining the Euro Areas Recovery
Ignazio Visco, deputy director general of the Bank
of Italy, shed light on the eurozones pressing
challenges, with a focus on four points that will
shape the EUs recovery and the strength of the
monetary union: recovery and monetary policy, the
fiscal outlook, imbalances and domestic demand,
and re-absorbing the unemployed and fostering
growth. Mr. Visco recognized the urgency of
fundamental structural reforms to raise potential
output in the eurozone that would create room for
monetary policy actions without raising inflation.
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B a n k I n s t i t u t e
around Europe. In the longer run, the yuans role
will also grow, especially in Asia.
Conference participants agreed that Asia will
play a critical role in building a stable global
reserve system. Global reserve pooling should be
the first best choice for a stable global reserve
system, and regional reserve pooling is the second
best. However, with the difficulty in reaching a
global agreement, deepening regional reserve
pooling in Asia could be a practical choice.
See more details about the conference at www.adbi.org/
event/3634.conference.global.reserve.system.asia/.
FORUM
Participants agreed that while developed
economies have started to recover, the process
remains fragile. A key policy challenge is to sustain
the recovery while withdrawing policy stimulus to
minimize adverse impacts on long-term growth.
Participants agreed this would require major
structural economic reforms to be undertaken by
economies in both Europe and Asia.
The conference brought together a broad range
of participants including active and former senior
policymakers, recognized academic experts, and
private sector specialists from Asia and Europe. It
was co-organized by forum members Bruegel,
Centre dEtudes Prospectives et dInformations
Internationales, Kiel Institute for the World
Economy, ADBI, Chinese Academy of Social
Sciences, Keio University, and Korea University.
See more details about this conference series at
www.adbi.org/event/3649.asia.europe.economic.forum/.
DISTINGUISHED SPEAKER
There is an urgent need for fundamental structural reforms to
raise potential output in the eurozone.
 A s i a n D e v e l o p m e n t
Unless new structural measures are adopted that
would shift demand from deficit to surplus
countries, recovery in the eurozone is likely to be
The Great Depression and the Global
Financial Crisis: Spot the Difference
To avoid protectionism, stimulate the domestic
economythat was a key message from Barry
Eichengreen, George C. Pardee and Helen N.
Pardee professor of economics and professor of
political science at University of California,
Berkeley, at an ADBI seminar on 3 March. In
discussing the similarities and differences between
the Great Depression and the current global
financial crisis, Mr. Eichengreen noted that in the
1930s, stimulus meant monetary stimulus, which
benefited the initiating country at the expense of its
trading partners. Today, countries have been
applying fiscal stimulus policies that benefit their
neighbors. But the initiating country, seeing
neighbors who are free-riding, has an incentive to
resort to protectionist measures. Now it is the
Formulating US Trade
Policy and Strategy
The need for the US to have a trade policy that supports an
open, rules-based trading system, in the past has brought
major gains to both US producers and consumers, leading to
higher living standards.
B a n k I n s t i t u t e
short-lived, in Mr. Viscos opinion.
Read a more detailed summary of this event at
www.adbi.org/event/3462.visco.distinguished.speaker/.
DISTINGUISHED SPEAKER
active country not the passive country, as in the
1930s, that has an incentive to destroy trade.
The active country, not the passive country as in the 1930s,
has an incentive to destroy trade.
Read a more detailed summary of this event at www.adbi.org/
event/3458.eichengreen.distinguished.speaker/.
DISTINGUISHED SPEAKER
US President Barack Obama is confronting a range
of political and economic challenges amid a global
recession as he tries to formulate US trade policy
objectives and a strategy to achieve them, Clayton
Yeutter, former US trade representative and
secretary of agriculture, said in a seminar on 23
March. A key plank of the strategy will be the
newly launched National Export Initiative, which
aims to double US exports to US$3 trillion over
the next five years. Mr. Yeutter noted that an open,
rules-based trading system has brought major gains
to US producers and consumers, and concluded
that inaction on trade is highly costly to the US
economy.
Read a more detailed summary of this event at
www.adbi.org/event/3635.yeutter.distinguished.speaker/.
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Adjustment to Trans-Pacific
Payments Imbalances
The ongoing global financial crisis is forcing
adjustment to trans-Pacific payments imbalances,
accompanied by an excessive contraction of
economic activity and rising unemployment. This
is clearly not a desirable way to reduce imbalances.
A conference on Trans-Pacific Rebalancing,
held on 34 March at ADBI, discussed factors that
would achieve balanced, sustainable growth in Asia
and the US, and the policy implications of these
adjustments in both regions. Participants included
experts from ASEAN economies, the US, India,
Japan, newly industrializing Asian economies, and
11th OECD-ADBI Roundtable on
Capital Market Reform in Asia
More than 100 representatives from government,
the business and financial sectors, and academia
from Asia, the US, and Europe joined the 11th
OECD-ADBI Roundtable on Capital Market
Reform in Asia on 2223 February to discuss exit
strategies, financial regulatory reform, growth
rebalancing, and post-crisis capital market
development strategy.
Appropriate timing of monetary tightening and
unwinding of fiscal support is considered crucial to
sustaining economic growth and maintaining its
stability. Unwinding public support or tightening
monetary policy too soon will risk reversing the
course of economic recovery, while maintaining
monetary easing and fiscal stimulus for too long
may lead to inflation, asset price bubbles, and
unsustainable public finance.
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SEMINAR
the PRC, as well as a broader audience of
government officials from Asia and the US,
multilateral agencies, and academia.
Participants agreed that global rebalancing
would not occur automatically and that appropriate
policy actions would be crucial. The conference
highlighted the need for international collective
action in this area given the importance of the
global rebalancing issue in the context of achieving
strong and sustainable growth.
Read a more detailed summary of this event at
www.adbi.org/event/3460.trans.pacific.rebalancing/.
CONFERENCE
To better monitor and manage systemic risk,
macro-prudential supervision should cover all
activities posing systemic risk. Financial regulation
should be extended to all complex financial
products and address conflicts of interest by
Unwinding public support or tightening monetary policy too
soon could risk reversing the course of economic recovery.
 A s i a n D e v e l o p m e n t
securities issues, ratings agencies, and advisors
in the distribution chain. Financial market
liberalization and reform including improved
corporate governance can play an important
New Policy Proposals for
Post-crisis Growth
What are the implications of the global financial
crisis for Asia? What policy actions can help the
region achieve balanced, inclusive, and
environmentally-friendly growth? These questions
lie at the core of Rebalancing for Sustainable
Growth: Asias Post-crisis Challenge, a
forthcoming book by ADBI and ADB. Key
findings will be presented at ADBs Annual
Meeting in Tashkent on 3 May.
With developed country export markets likely
to slow, the book argues that Asias export-led
growth strategy needs to be re-oriented toward
greater reliance on domestic and regional demand.
Assessing the Outlook for
Public-Private Partnerships
ADB Managing Director General Rajat Nag highlighted the
potential of public-private partnerships to help meet Asias
vast infrastructure investment needs.
B a n k I n s t i t u t e
enabling role in reducing corporate savings and
promoting rebalancing of growth in Asia.
Read a more detailed summary of this event at www.adbi.org/
event/3430.adbi.oecd.roundtable.asia.economy/.
FORTHCOMING PUBLICATION
The books analysis and policy measures cover
five major areas: enhancing macroeconomic
stability through improved policy frameworks;
rebalancing production via deregulation,
investment incentives, and liberalizing regional
trade; enhancing social protection via improved
social safety nets and investments in education and
health; deepening financial system by reducing the
risk of systemic crises and expanding financial
markets; and forging regional cooperation in areas
such as liquidity provision, trade, and
macroeconomic policy.
WORKSHOP
Public-Private Partnership (PPP) Days 2010
brought more than 250 public sector officials from
40 countries to Manila from 2224 March to
review the impact of the global financial crisis on
PPP activities, the outlook for PPP projects in the
short and medium term, and the implications for
government policies.
The environment for PPP projects in Asia and
globally has been severely impacted by the
financial crisis. Despite the recent challenges,
governments around the region are increasingly
interested in the potential of PPP modalities to
develop public infrastructure. The event
highlighted the critical importance of developing
sound regulatory and legal frameworks for PPP
transactions as competition for investment funds
intensifies.
The event was organized by ADB and the
World Bank Institute, with support from ADBI;
Department of Finance, Philippines; Development
Academy of the Philippines; International Finance
Corporation; Inter-American Development Banks
Multilateral Investment Fund; and World Bank.
Materials are online at www.pppnetwork.info.
Read a more detailed summary of this event at
www.adbi.org/event/3456.ppp.days.2010/.
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Library of Congress Selects ADBI
Website for Web Harvesting Project
The US Library of Congress will include ADBIs
website in its historic collection of Internet
materials. It will gather content from ADBIs
website at regular intervals and make it available
to researchers at Library of Congress facilities
and though the Librarys website at
www.loc.gov/webarchiving/. The collection
preserves important digital resources for
education and scholarship.
ADBI working papers are now systematically
posted on the Research Papers in Economics
(RePEc) and the Social Science Research Network
(SSRN) databases. RePEc is a collaborative effort
of volunteers to disseminate research in
economics. All RePEc material is freely available.
SSRN disseminates social science research. It
consists of databases containing abstracts of
scholarly working papers and electronic paper
collections of downloadable documents.
Good Policy Requires Good Numbers
Reprinted with permission from The Brunei Times.
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WEB UPDATE
Follow ADBI on Twitter, where we
announce new research, events, and
speeches. Visit our page at
www.twitter.com/ADBInstitute.
WORKSHOP
The global financial crisis has progressively
become a global jobs crisis. ASEAN economies
have been relatively strong performers through the
crisis, but their jobs markets have not been spared.
Unemployment and the number of working poor
seem to have risen sharply.
Yet most ASEAN policymakers cannot
accurately gauge the extent of the jobs crisis in
their countries. They lack the necessary, reliable,
timely, and consistent labor statistics.
A workshop on Labor Market Information
and Analysis in Brunei Darussalam on 24 March,
organized by ADBI, the ASEAN Secretariat, and
the International Labor Organization, initiated
dialogue among policymakers on main economic
indicators, decent work, labor market analysis, and
trade, migration and labor markets. Participants
agreed to take this work forward through a specific
program in order to realize the ASEAN Socio-
Cultural Blueprints goal to enhance capacity of
governments to monitor labor markets and human
resource indicators, and design social impact
policies.
Read a more detailed summary of this event at
www.adbi.org/event/3432.labor.market.info.analysis.asean/.
 A s i a n D e v e l o p m e n t B a n k I n s t i t u t e

Selected Upcoming Events

ADB Annual Meeting (Tashkent)

As many as 3,000 participants, including heads of state, finance ministers, central bank governors, and
14 May representatives from the private sector, academe, media, and civil society are expected to attend ADBs
43rd Annual Meeting. This will be the first ADB Annual Meeting held in Central Asia.
www.adb.org/AnnualMeeting/2010/

Post-crisis Agenda for Asia (Tashkent)

This seminar will examine approaches to rebalancing growth in Asia toward domestic and regional
demand. Rebalancing will be critical given expectations that exports to developed economies will remain
3 May sluggish and global payments imbalances are not sustainable. ADBI has conducted a series of workshops
on related issues in the past year and will publish a book on this subject in the months ahead.
www.adbi.org/event/3642.postcrisis.agenda.asia/

Corporate Environmental Management: From Policy to Practice (Bangalore)

Across Asia, governments are actively engaging the private sector to integrate their organizational
strategies with environmental and social approaches to development. This program will help government
36 May
officials and managers in public and private sector organizations develop a strategic approach to dealing
with environmental issues in a collaborative manner.
www.adbi.org/event/3653.corporate.environmental.management/
View all upcoming events at www.adbi.org/calendarofevents.

Recent Working Papers

Regulating Systemic Risk
Masahiro Kawai, Michael Pomerleano
The failure to spot emerging systemic risk and prevent the
current global financial crisis warrants a reexamination of
approaches taken so far for crisis prevention. The paper argues
that financial crises can be prevented because of their long
build up over time caused by policy mistakes, and their
eventual slow motion eruption.
Read WP 189 at www.adbi.org/working-paper/
2010/01/27/3447.regulating.systemic.risk/.
The Costs of Achieving the Millennium Development Goals
through Adopting Organic Agriculture
Anil Markandya, Sununtar Setboonsarng,
Qiao Yu Hui, Rachanee Songkranok and Adam Stefan
Using four case studies (Wanzai, PRC; Wuyuan, PRC; Kandy,
Sri Lanka; Ubon Ratchathani, Thailand), this paper provides
estimates of the costs of organic agriculture programs, and sets
them in the context of the costs of attaining the UNs MDGs.
Read WP 193 at www.adbi.org/working-paper/
2010/02/09/3455.cost.mdg.organic.agriculture/.

Accelerating Regional Integration: Issues at the Border
Douglas H. Brooks, Susan F. Stone
The recent crisis offers an excellent opportunity to make
progress on facilitating intra-Asian trade and boosting the
regions contribution to global economic recovery. This paper
examines the status of, and challenges to, trade facilitation
among the Asian APEC members, and the roles of hard and
soft infrastructure in improving that performance.
Read WP 200 at www.adbi.org/working-paper/
2010/02/25/3587.accelerating.regional.integration/.
The Euro After Its First Decade: Weathering the Financial
Storm and Enlarging the Euro Area
Klaus Regling, Servaas Deroose, Reinhard Felke, Paul Kutos
The first decade of the EMU has been a huge success, has
significantly benefited its member countries, and has
accelerated the European integration process. Imbalances
within the EMU have, however, increased in the last 10 years
and have become even more evident in the global economic
crisis. Policies among EMU members should be better
coordinated, structural reforms accelerated, framework for
financial market supervision strengthened, and external
representation streamlined.
Read WP 205 at www.adbi.org/working-paper/
2010/03/15/3637.euro.after.first.decade/.
Investigating the Effect of Exchange Rate Changes on the
Peoples Republic of Chinas Processed Exports
Willem Thorbecke
Many argue that the yuan needs to appreciate to rebalance the
PRCs trade. However, empirical evidence on the effects of a
yuan appreciation on the PRCs exports has been mixed for the
largest category of exports, processed exports. This paper
finds that exchange rate appreciations across supply chain
countries would cause a much larger drop in processed exports
than a unilateral appreciation of the yuan.
Read WP 202 at www.adbi.org/working-paper/
2010/03/04/3631.exchange.rate.changes.prc.exports/.
The Eurozone in the Current Crisis
Charles Wyplosz
This paper contrasts the US and European situations during
the recent crisis and examines how much of the crisis has been
imported by Europe from the US. The paper argues that
Europe never had a chance to avoid contagion from the US
and also documents the relatively limited reaction of both
monetary and fiscal authorities. The concluding remarks
consider the differences that the monetary union has made and
their relevance.
Read WP 207 at www.adbi.org/working-paper/
2010/03/26/3643.eurozone.current.crisis/.

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Intelligent Transport for Sustainable Growth
Governments have started to introduce ITS as an important tool to solve social, economic, and environmental problems caused by
traffic congestion, air pollution, and increasing green house gas emissions.
Governments and municipalities around the world
have recognized Intelligent Transport Systems
(ITS) technology as a vital tool to solve social,
economic, and environmental problems caused by
traffic congestion, air pollution, and increasing
greenhouse gas emissions. As they begin to
implement ITS projects, governments are
exploring effective ways to advance the technology
and tailor it to local conditions.
The Regional Workshop on ITS was held on
810 March at ADBI and highlighted the importance
of combining ITS solutions with other transport
policies, and the need to formulate ITS standards
and implement capacity building at all levels to
ensure the maximum benefits from ITS systems.
ADBI News
Publisher: Takashi Kihara
ADBI News reports quarterly on the activities of the Asian
Development Bank Institute. The views expressed in this
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B a n k I n s t i t u t e
More than 120 participants from central and
local governments in 10 countries around Asia
explored four ITS-related themes: Asian
infrastructure and the ITS concept, identifying
common road transportation issues in Asia,
enhancing dissemination and standardization of
ITS technology, and capacity development.
Participants agreed ITS technology can play a key
role in supporting efficient transport integration in
a seamless Asia.
The workshop was organized by ADBI in
collaboration with ADB; ITS Japan; Cabinet
Office, Government of Japan; and CITYNET.
Read a more detailed summary of this event at www.adbi.org/
event/3457.workshop.intelligent.transportation.systems/.
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