- Ana Corbacho, and Shanaka Peiris
- Published Date:
- July 2018
THE ASEAN WAY
Sustaining Growth and Stability
Ana Corbacho and Shanaka J. Peiris
INTERNATIONAL MONETARY FUND
Note to Readers
This is an excerpt from The ASEAN Way, edited by Ana Corbacho and Shanaka J. Peiris.
The five founding members of the Association of Southeast Asian Nations, also known as the ASEAN-5 (Indonesia, Malaysia, the Philippines, Singapore, Thailand), have been among the strongest emerging markets over the past 20 years. This small group has transformed their policy frameworks since the Asian financial crisis to bring about economic stability during a period of global financial turmoil and transformation in the region. The success of the ASEAN-5 also provides lessons for other emerging market and developing economies.
The ASEAN-5 have built buffers and adapted their policies to respond to global spillovers. However, a variety of global risks will continue to test the group and their economic resiliency. The chapters presented in this book look at the evolution of monetary policy and economic frameworks in the region, study the transmission of global spillovers and the policy responses by the ASEAN-5, outline future economic challenges to consider, and make suggestions for adapting to the changing global dynamics and further strengthening policy frameworks to promote financial stability.
This excerpt is taken from uncorrected page proofs. Please check quotations and attributions against the final published volume.
The ASEAN Way: Sustaining Growth and Stability
Edited by Ana Corbacho and Shanaka J. Peiris
Pub. Date: Fall 2018
Formats: Digital; Paperback, 6x9 in., pp. 308
For additional information on this book, please contact:
International Monetary Fund, IMF Publications
P.O. Box 92780, Washington, DC 20090, U.S.A.
Tel: (202) 623-7430 • Fax: (202) 623-7201
© 2018 International Monetary Fund
THE ASEAN WAY
Sustaining Growth and Stability
Ana Corbacho and Shanaka J. Peiris
INTERNATIONAL MONETARY FUND
© 2018 International Monetary Fund
Cover design: Winking Fish, Inc.
Cataloging-in-Publication Data IMF Library
Names: Corbacho, Ana. | Peiris, Shanaka J. (Shanaka Jayanath), 1975- | International Monetary Fund.
Title: The ASEAN way : sustaining growth and stability / edited by Ana Corbacho and Shanaka J. Peiris.
Other titles: Association of South East Asian Nations way
Description: Washington, DC : International Monetary Fund,  | | Includes bibliographical references.
Identifiers: ISBN 9781513558905 (paper)
Subjects: LCSH: ASEAN. | Economic development—Southeast Asia. | Monetary policy—Southeast Asia.
Classification: LCC HC441.A712 2018
DISCLAIMER: The views expressed in this book are those of the authors and do not necessarily represent the views of the IMF’s Executive Directors, its management, or any of its members.
Recommended citation: Corbacho, Ana, and Shanaka J. Peiris, eds. 2018. The ASEAN Way: Sustaining Growth and Stability. Washington, DC: International Monetary Fund.
ISBN: 978-1-51355-890-5 (Paper)
Please send orders to:
International Monetary Fund, Publication Services
P.O. Box 92780, Washington, D.C. 20090, U.S.A.
Tel.: (202) 623–7430 Fax: (202) 623–7201
Ana Corbacho and Shanaka J. Peiris
Part I From the Asian Financial Crisis to the Present
2 Evolution of Monetary Policy Frameworks
Hoe Ee Khor, Jaime Guajardo, and Shanaka J. Peiris
3 Toward a Resilient Financial Sector
Pablo Lopez Murphy
Part II Policy Responses to Global Spillovers
4 Global Spillovers
Shanaka J. Peiris, Minsuk Kim, and Sherillyn Raga
5 Monetary and Exchange Rate Policy Responses
Hoe Ee Khor, Shanaka J. Peiris, Mia Agcaoili, Ding Ding, Jaime Guajardo, and Rui Mano
6 Macroprudential Policies
Part III Challenges Ahead
7 Monetary Policy in the New Normal
Juan Angel Garcia Morales, Ana Corbacho, Geraldine Dany-Knedlik, Aubrey Poon, and Umang Rawat
8 Systemic Risks and Financial Stability Frameworks
Pablo Lopez Murphy, Julian Chow, Ana Corbacho, David Grigorian, and Sohrab Rafiq
9 Macroeconomic Policy Synergies for Sustained Growth
Manrique Saenz, Ana Corbacho, Ichiro Fukunaga, Dirk Muir, Shanaka J. Peiris, and Sohrab Rafiq
10 The Future of ASEAN-5 Financial Integration
Yiqun Wu, Ana Corbacho, Khristine L. Racoma, and Xiaohui Sharon Wu
The resilience and sustained growth over the past 20 years of the five founding members of the Association of Southeast Asian Nations (ASEAN)—Indonesia, Malaysia, the Philippines, Singapore, and Thailand—have been among the strongest across emerging markets. This book shares many lessons from the ASEAN-5 countries’ policy reforms and economic resurgence after the Asian financial crisis, including the consensus-based “ASEAN Way” of collaborating and integrating trade, finance, and labor markets on the path toward an ASEAN Economic Community. Cooperative frameworks also underpin the region’s financial safety net under the Chiang Mai Initiative Multilateralization.
Overall, the ASEAN-5 economies’ monetary policy frameworks have performed well, delivering both output and price stability during a period of significant domestic and regional turbulence and transformation. A gradual move toward greater exchange rate flexibility, coupled with the flexible inflation-targeting frameworks put in place in Indonesia, the Philippines, and Thailand, and the somewhat different approaches of Malaysia and Singapore, helped sustain growth with low inflation. The ASEAN-5 also overhauled financial regulation and supervision and undertook financial reforms aimed at restructuring banks and nonfinancial corporations and developing local current bond markets. These policy reforms helped these countries withstand the global financial crisis and preserve financial stability.
Global financial cycles have had a pervasive impact on ASEAN-5 business cycles, transmitted partly through financial conditions and capital flows. Real economy factors, such as external demand from the United States and more recently China, have also been important, but global financial factors have tended to dominate. To lean against the wind of capital flows and preserve financial stability, regional policymakers have relied on several policy levers, including macro-prudential and microprudential measures, exchange rate adjustment, and foreign exchange market intervention. These policy tools have supplemented monetary policy. The extensive use of macroprudential policies in the ASEAN-5, a frontier area in macro policymaking globally, provides lessons on their potential effectiveness. Empirical and model-based approaches show that macroprudential policies helped manage the financial cycle in ASEAN-5, allowing macro policies to focus on the business cycle and sustain growth.
Global financial spillovers will continue to test the resilience of ASEAN-5 economies. Sustaining growth and stability will demand further upgrading of policy and institutional frameworks, exploiting macroeconomic policy synergies, and enhancing resilience through regional financial integration. Against the backdrop of elevated global uncertainty, the policy challenges that will face the ASEAN-5 may vary more than those they faced during recent decades, given different starting conditions. Whereas some economies must grapple with persistently weak inflation amid high household leverage, others must carefully orchestrate an infrastructure push and manage continued global financial volatility.
The IMF remains a committed partner in the region’s growth and transformation. I hope this book will inspire a broader conversation on how the ASEAN way of collaboration and integration in the areas of trade, finance, and labor markets can guide the path forward not just for Southeast Asia, but also for other emerging market and developing economies.
International Monetary Fund
This publication benefited from valuable guidance from Changyong Rhee and Odd Per Brekk, Director and Deputy Director in the IMF’s Asia and Pacific Department. It also benefited from insights from panelists and participants at numerous seminars and events, including at ASEAN-5 central banks, the ASEAN+3 Macroeconomic Research Office (AMRO)–IMF annual conferences, the South East Asian Central Banks (SEACEN) deputy governors’ conference, and at the IMF.
We express our strong appreciation for support from Hoe Ee Khor (AMRO), who guided our early work; IMF Executive Director Juda Agung; and coauthors and contributors Mia Frances R. Agcaoili, Julian T. S. Chow, Geraldine Dany-Knedlik, Ding Ding, Ichiro Fukunaga, Juan Angel Garcia, David Grigorian, Jaime Guajardo, Minsuk Kim, Rui C. Mano, Dirk Muir, Pablo Lopez Murphy, Aubrey Poon, Khristine L. Racoma, Sohrab Rafiq, Sherillyn R. Raga, Umang Rawat, Manrique Sáenz, Yiqun Wu, and Xiaohui Wu.
We are indebted to the IMF’s Editorial and Publications Division. Special thanks go to Gemma Rose Diaz for managing the production of the book, as well as to Sherrie Brown, Patricia Loo, and Lucy Morales for their editorial contributions. We also thank Jeffrey Hayden and Linda Griffin Kean for their unwavering support.
We are very grateful to Francis Joseph Landicho and To-Nhu Dao, from the Asia and Pacific Department, for their excellent job coordinating the production of the manuscript.
Ana Corbacho and Shanaka J. Peiris
Mia Frances R. Agcaoili is on secondment as economic analyst at the IMF Resident Representative Office in Manila, Philippines, where her primary task is to write the ASEAN-5 financial markets developments section of the ASEAN-5 Economic Monitor and provide research and statistical support to the IMF country team on the Philippines. She has also conducted some econometric work on tax reform and monetary policy. Before being detailed to the IMF Resident Representative Office, she was a bank officer at the Department of Economic Statistics of the Bangko Sentral ng Pilipinas. She specialized in external debt and balance of payments and spearheaded the central bank’s initiative in refining the central bank’s debt sustainability model. She obtained her undergraduate degree in statistics in 2011 and master’s in technology management in 2015—both from the University of the Philippines.
Julian T. S. Chow is a senior economist in the IMF Monetary and Capital Markets Department. His surveillance work on emerging market banking and the corporate sector has been published in the IMF’s Global Financial Stability Report and Spillover Report as well as in the Financial Stability Board’s Report on Corporate Funding Structures and Incentives. He has also worked extensively in the IMF Financial Sector Assessment Program in various capacities, as deputy mission chief for Azerbaijan, stress tester for Mexico, and financial sector expert for India and Malaysia. He started his career at Bank Negara Malaysia, the central bank, where he was acting manager for foreign exchange in the Investment Operations and Financial Markets Department. He has also worked in the private sector as a senior fixed income fund manager. He holds a chartered financial analyst (CFA) charter and postgraduate degrees in finance and economics from the London School of Economics and the Royal Melbourne Institute of Technology.
Ana Corbacho is currently head of the Strategy Unit of the IMF. When this book was under preparation, she was division chief in the IMF Asia and Pacific Department (APD), where she led the country team on Thailand, the APD Fiscal Group, and the APD ASEAN Group. She has also led IMF operations on a range of countries in Latin America and the Caribbean and has overseen various high-profile regional projects. These include APD’s participation in the first joint test run of the IMF and the Chiang Mai Initiative Multilateralization, a financial network report on Central America and Colombia, and work on the IMF’s Regional Economic Outlook for the Western Hemisphere during the global financial crisis. Between 2010 and 2013, she was the principal economic advisor for the Institutions for Development Sector at the Inter-American Development Bank, responsible for research and dissemination. Her areas of expertise include macroeconomic analysis, fiscal policy, public-private partnerships, financial networks, household survey analysis, and crime and violence. She received her PhD in economics from Columbia University and her Licentiate in economics from Universidad de San Andrés.
Geraldine Dany-Knedlik since 2018 has held a postdoctoral position at DIW Berlin conducting research on empirical monetary economics and macroeconomics in the Macroeconomics Department. She also participates in the joint economic forecast, commissioned by the Federal Ministry for Economic Affairs and Energy, and is instrumental in evaluation of the overall economic situation and development in Germany, the euro area, and the rest of the world. Before joining DIW Berlin she was a PhD student at the Halle Institute of Economic Research, in the Macroeconomics Department. She was also an economist at the Martin Luther University of Halle-Wittenberg and a research intern at the IMF and the European Central Bank in 2016. Her main research interests are monetary policy and economics, dynamic macroeconomics, and applied time series econometrics. She received an MSc in economics and international economics from the University of Nottingham.
Ding Ding is a senior economist in the IMF Asia and Pacific Department. He is currently the senior desk economist for the China team, as well as mission chief for Kiribati. He previously worked on several advanced and emerging market economies, including Australia, Korea, New Zealand, and Sri Lanka, and has published on a variety of topics, including macro-financial linkages, monetary policy transmission, and macroeconomic modeling and forecasting. He obtained a PhD in economics from Cornell University.
Ichiro Fukunaga is senior economist in the Strategy, Policy, and Review Department of the IMF, where he works on various areas of IMF policy. He is also on the IMF country team for Thailand in the Asia and Pacific Department. Before joining the IMF in 2015, he was senior economist at the Bank of Japan, where he worked on macroeconomic projections and modeling, economic analysis, and financial market analysis. He received his PhD in economics from the London School of Economics and his MA and BA in economics from the University of Tokyo.
Juan Angel Garcia is currently senior economist for the Thailand team in the Asia and Pacific Department of the IMF. Before joining the IMF, he worked at the European Central Bank in several departments and divisions, including Directorate General Research, Capital Markets and Financial Structure, and Euro Area Macroeconomic Developments. His areas of expertise are macroeconomics, asset pricing, and inflation expectations. He obtained his PhD in economics from the University of Warwick, United Kingdom.
David Grigorian is a senior economist in the IMF Asia and Pacific Department, on secondment from the Monetary and Capital Markets Department. He holds a PhD in economics from the University of Maryland at College Park, MA in economics from the Central European University, and MSc in industrial engineering from the American University of Armenia. Throughout his career in the Monetary and Capital markets Department (2009–16), he dealt with a wide array of emerging and advanced market countries (including The Bahamas, Barbados, Bulgaria, Cyprus, Greece, Jamaica, Kuwait, Morocco, Tunisia, and Vietnam) on issues such as sovereign and corporate debt restructuring, debt market development, and financial crisis management. In his previous position as desk economist on Iraq (2006–09), he helped the authorities prepare the macroeconomic framework under occupation and draft federal budgets for 2007, 2008, and 2009. He has published on a range of issues, including banking and capital markets, growth and institutions, remittances, and fiscal performance, and his research is cited widely.
Jaime Guajardo is a senior economist in the IMF Asia and Pacific Department. He works in the ASEAN-4 Division as a desk economist for Indonesia. He has been at the IMF for 13 years and in his current department for the past 4. Before that he worked in the Research Department, IMF Institute, and European Department. He did his undergraduate and master level studies at the Universidad de Chile, and he has a PhD in economics from the University of California, Los Angeles. He is a citizen of Chile.
Hoe Ee Khor is chief economist and a senior management member of the ASEAN+3 Macroeconomic and Research Office (AMRO). He is responsible for the surveillance function of AMRO and for leading and managing the macroeconomic and financial market surveillance work on the ASEAN+3 region and its member economies. His previous positions include deputy director of the IMF Asia and Pacific Department, assistant managing director of the Monetary Authority of Singapore, and chief economist of the Abu Dhabi Council for Economic Development. He holds a PhD in economics from Princeton University.
Minsuk Kim is an economist at the IMF. Since joining the IMF in 2011, he has worked extensively in the areas of multilateral surveillance and structural reform and served as a member of IMF missions to several member countries, most recently to the Philippines, Canada, and Pakistan. He holds a PhD in economics from the University of California, Los Angeles.
Rui C. Mano is an economist in the IMF Asia and Pacific Department. He covers China and Hong Kong SAR and previously worked on Mongolia, Korea, and the Philippines. He started his IMF career in the Research Department analyzing multilateral external sector topics, including global imbalances. His research interests are exchange rate risk, foreign exchange intervention, and global imbalances, among others. He holds a PhD in economics from the University of Chicago.
Dirk Muir is a senior economist in the IMF Asia and Pacific Department, where he works in the Australia–New Zealand Division. Previously, he was a long-standing member of the Research Department’s Economic Modeling Division, focused on developing and using large-scale macroeconomic models. He has worked on a large variety of issues in international economics using models, including Australian links with China, oil markets, and global rebalancing, as well as Australian fiscal policy, Italian and European structural reform, and issues more generally related to fiscal consolidation and multipliers. He holds an MA in economics from Queen’s University (Canada). He held a variety of positions before joining the IMF, at the Bank of Canada, the Department of Finance of Canada, the Norges Bank, the European Central Bank, and Deutsche Bank Global Markets London.
Pablo Lopez Murphy is deputy division chief in the Regional Studies Division of the IMF Asia and Pacific Department. He leads the IMF country team on Fiji. Before taking this position, he was senior economist for the team that followed Greece during 2014–16 and for the Spain team during 2012–14, in the European Department. Between 2009 and 2011 he was in the Fiscal Affairs Department, where he worked on the teams that followed Mexico and Lebanon. He also participated in technical assistance missions to Hungary, Jordan, Botswana, and the former Yugoslav Republic of Macedonia. His areas of expertise are international macroeconomics and public finance. He received a PhD in economics from the University of California, Los Angeles, and a Licenciate in economics from the Universidad Nacional de La Plata in 1998.
Shanaka Jayanath (Jay) Peiris is currently the IMF Asia and Pacific Department’s mission chief for Myanmar and deputy division chief of the ASEAN-2 Division, covering ASEAN macro-financial surveillance for the Asia and Pacific Department. Previously he was the IMF’s resident representative in the Philippines, senior economist in the Asia and Pacific and Monetary and Capital Markets Departments covering Association of Southeast Asian Nation countries and south Asia, and mission chief to Pacific island countries, and he led a sub-working group on asset price risks for the G20 Mutual Assessment Process. He has also worked on eastern and southern Africa. He joined the IMF in 2001 after receiving his PhD in economics at Oxford University. He was a lecturer in mathematical economics and econometrics at Sommerville College and Jesus College, Oxford. Earlier, he interned at Deutsche Bank AG and the World Bank.
Aubrey Poon is a postdoctoral fellow at the University of Strathclyde and a research associate at the Centre of Applied Macroeconomic Analysis at the Australian National University. His main field of research is applied macroeconometrics, especially in the application of time-varying parameters and stochastic volatility models to macroeconomic issues, such as business cycle analysis, forecasting, and inflation modeling. He received both his PhD and master’s in economics at the Australian National University.
Khristine L. Racoma is an economic analyst on secondment in the IMF Resident Representative Office in Manila, Philippines, where she conducts research and works on analytical notes provided to the IMF mission team. She handles requests for collection of information and analysis on the tax reform and fiscal and real policy issues. Before coming to the IMF, she worked as an economist II in the Research and Information Office of the Department of Finance of the Philippines. Her major tasks included quantitative analysis of the department’s comprehensive tax reform program. She received her bachelor’s in economics from the University of Santo Tomas.
Sohrab Rafiq is an economist in the IMF Asia and Pacific Department. In addition to participation in surveillance missions to member countries, he has been involved in supporting and negotiating a number of IMF-led programs. He previously worked as an economist for the European Central Bank in Frankfurt and the government of Malaysia’s sovereign wealth fund (Khazanah Nasional) in Kuala Lumpur. He holds a PhD in economics from the University of Nottingham, with a specialization in macroeconometrics. He has published numerous peer-reviewed journal articles in the areas of macroeconomics and macroeconometrics.
Sherillyn R. Raga was a research associate at the IMF Resident Representative Office in Manila, Philippines, on secondment with the Bangko Sentral ng Pilipinas in 2015–16, where she drafted the ASEAN-5 financial market page for a monthly regional economic monitor, contributed to the IMF Cluster Report on the Evolution of Monetary Policy Frameworks in the ASEAN-5, and was a team member for the IMF Article IV Mission to the Republic of Palau. Previously she worked more than five years in the Bangko Sentral International Relations Department, where she prepared the central bank’s positions regarding Association of Southeast Asian Nations financial integration, the World Trade Organization, bilateral central bank cooperation initiatives, and regional capacity-building activities, among others. She obtained her economics degree from the University of the Philippines and is currently a candidate for an MSc in economics for development at Oxford University.
Umang Rawat is an economist in the Monetary and Capital Markets Department of the IMF, where he works on issues related to monetary, macroprudential, and exchange rate policies. Previously, he worked in the Asia and Pacific Department covering monetary and financial sector issues for Singapore and as part of the IMF’s Regional Economic Outlook for Asia and the Pacific in 2017. He has also worked extensively on issues related to the IMF’s special drawing rights (SDRs), including review of the renminbi’s inclusion in the SDR basket. His areas of expertise include macroeconomic analysis, business cycle dynamics, monetary policy, and macro-financial linkages. He holds a PhD and bachelor’s in economics from the University of Cambridge.
Manrique Sáenz is currently senior economist for the Thailand team in the Asia and Pacific Department of the IMF. During his IMF career, he has gained ample experience on emerging market issues, including fiscal sustainability, international capital flows, and the impact of the global financial crisis on emerging markets. During 2011–14 he was senior advisor for the minister of finance of Costa Rica, where he worked on fiscal reform, social security issues (health insurance and pensions system), and domestic fiscal financing, among others. Before joining the IMF in 2005, he worked at the Central Bank of Costa Rica as a researcher and advisor to the governor. His areas of expertise are macroeconomics and fiscal policy. He obtained his PhD in economics from the University of California, Los Angeles.
Xiaohui Wu was a summer intern in the IMF Asia and Pacific Department in 2017 and is a PhD candidate at George Washington University. Her research interests include international finance and nonlinear econometrics models. She has done research on nonlinear behavior of capital flows and exchange rates. She received her MA in economics from George Washington University in 2014. Before that, she worked in the audit department of KPMG China from 2008 to 2011, where she specialized in financial auditing of the manufacturing and telecommunications sectors. She received a BA in economics and law from Xiamen University in 2008.
Yiqun Wu is currently an economist in the ASEAN-2 Division of the IMF Asia and Pacific Department, covering Myanmar and Thailand. Previously, he was the main desk economist for the Solomon Islands, a program country under the Extended Credit Facility. He has worked in the Asia and Pacific Department’s Regional Studies Division and coauthored several cross-country analytical chapters in the Asia and Pacific Regional Economic Outlook. His country experience at the IMF includes Kiribati, Palau, and Papua New Guinea, and he has contributed to the IMF’s research and policy agenda in small states, including two IMF Board papers and several policy papers. His areas of expertise include macroeconomics, international economics, and economic growth and development. He obtained his PhD in economics from the State University of New York, Buffalo.