1. ‘Stability’ and ‘Instability’ Determinants of International Monetary Cooperation : An Evolution from ‘CMI’ TO ‘CMIM’ and from ‘CMIM’ to Elsewhere Designing Social Inquiry HAN Daehee I33011 Submitted on June 2, 2014

2. A Puzzle A Puzzle : why hasn’t CMIM evolved into a ‘regional’ monetary union just as European countries had succeeded in gradually developing EMS (European Monetary System) into EMU (European Monetary Union)? Two issues which can be contrasted with my puzzle must be considered at the same time. -ASEAN+3 countries succeeded in creating CMI to react actively against either the currency crisis of 1997. -Although it did take so long for ASEAN+3 countries to evolve CMI into CMIM which built up a multilateral monetary cooperation from bilateral currency swap, why institutional functions of CMIM and the total amount of contribution to it expand?

3. A Research Question Under what conditions and extent can international monetary ‘cooperation’ succeed in achieving an evolution into a higher institutionalized framework such as CMIM of East Asia or fail to do so?

4. The Existing Explanations (1) Three Channels of the Existing Explanations regarding the International Monetary Relations -How domestic currency regime choice can be decided and it can have distributional consequences -How appropriate level of exchange rate [to appreciate or depreciate] can be determined. -How the international political economy of exchange rate policy can affect ‘coordination’ or ‘cooperation’ in international monetary relations. Main focus of this research - ‘Coordination’ and ‘cooperation’ literatures.

5. The Existing Explanations (2) ‘Coordination’ Literature -Definition : an interaction among governments whose principal challenge is for national policies to converge on a focal point -For example, ‘coordination’ of states can be applied when Simply choosing to link national currencies to gold or to the dollar, in which the mutual adjustment of policies is unnecessary. -Frieden and J. Lawrence Broz : “Virtuous circle” and “Vicious circle”

6. Existing Explanations (2) Cooperation Literature -International monetary relations may require more than simple convergence around a visible anchor and indeed may call for the resolution of more serious problems of cooperation. -In other words, fixed-rate systems may only be stable when governments actively choose to cooperate with one another.

7. Existing Explanations (3) Cooperation Literature by Benjamin Cohen - What stimulates international monetary cooperation? 1)A shared interest in currency stability 2)Linkage to other policies 3)The institutionalized nature of interstate cooperation 4)Numbers 5)Environmental economic conditions

8. Variables One Independent Variable -IV1 : The Degree of Socialization among the ASEAN+3 countries Two Dependent Variables - DV1 : Success in creating and implement International Monetary ‘cooperation’ in East Asia - DV2 : Failure to create and implement International Monetary ‘cooperation’ in East Asia Research Objective - Although the Degree of Socialization cannot explain everything on international monetary cooperation in East Asia, this research wants to testify how much the degree of socialization might impact on success or failure to create and implement the evolution from CMI to CMIM.

9. Two Hypotheses and An Equation Two Hypotheses and an Explanatory Equation for This Research -Hypothesis 1: If ‘socialization’ among ASEAN+3 countries lead them to commit to the ‘institutional’ framework they designed, the creation and implementation of international monetary ‘cooperation’ is likely to be activated in East Asia. -Hypothesis 2: If ‘socialization’ among ASEAN+3 countries doesn’t lead them to commit to the ‘institutional’ framework they designed, international monetary ‘cooperation’ such as CMIM is not likely to be sustained and failed in East Asia. An Explanatory Equation for this Research - F(The Degree of IMC in East Asia) = a*(The Degree of Socialization) * IMC = International Monetary Cooperation

10. ‘Socialization’ : the Scope and Analytical Framework(1) processes and outcomes shaped by ‘socialization’ among the states can create and implement different ‘environments’ that national interests can be adjusted in international affairs. The Third Assumption of Constructivists: National interests are decided by social construction processes of identity, and national interests and identity dynamically change, interacting with each other under the continual political processes. Although still national interests and strategic calculations of realists are quite dominant, at least ‘states’ somehow can have potentials in reshaping calculations of whether states should plug in the international ‘cooperative’ frameworks for the long term. By assessing how ‘human agreement’ and ‘reshaped social construction’ can influence on ‘behavior’ in terms of the main ‘states’ related to an evolution from ‘CMI’ to ‘CMIM’ such as four dimensions including China, Japan, Korea, and ASEAN countries.

11. ‘Socialization’ : The Scope and Analytical Framework(2) A shared interest in stabilityA shared interest in stability Institutionalized Nature : Differences of National Monetary PoliciesInstitutionalized Nature : Differences of National Monetary Policies Issue Indivisibility among the States Issue Indivisibility among the States Macroeconomic Conditions Macroeconomic Conditions The Number of Principal Members The Number of Principal Members Contextual Settings An ‘Enforcement’ in PD GameAn ‘Enforcement’ in PD Game A ‘Communication’ in SH gameA ‘Communication’ in SH game A ‘Distribution’ in BS GameA ‘Distribution’ in BS Game Actual Interaction [Processes & Distribution of Gains] Creation of CMICreation of CMI Evolution from CMI to CMIMEvolution from CMI to CMIM Hesitation of the Evolution from CMIM to Somewhere?Hesitation of the Evolution from CMIM to Somewhere? Outcomes of Socialization

12. TEST (1) Research Objective -Rather than proposing This research seeks to testify how ‘socialization’ that principal members reshape and socially construct can affect the creation and implementation of international monetary cooperation such as CMIM in East Asia. Methodologies –One case study –Processing-tracing will be adopted. –Two temporal criteria: a period of East Asia Currency Crisis from 1997 to 2007 and the other period of Global Financial Crisis from 2008 up to Now.

13. TEST (2) The Importance of this research : Theoretical Dimension -First, this research seeks to find out how political leaders could interact, reshape their own interests. -Second, How principal states came up with some ideas to commit or hesitate to commit to the CMI or CMIM can be found out. -Third, finding out why implementation frameworks of international monetary cooperation were changed from bilateral (Bilateral Currency Swap) to multilateral one (Multilateral Currency Swap Agreement) is also meaningful one. The Importance of this research : Methodological Dimension - Although the number of case to observe is the only one, the evolution from CMI to CMIM, it can be separated into two cases related to the ‘crisis’ according to the temporal dimensions. –At the same time, by explaining ‘the only one independent variable’, ‘socialization’ with three dimensions, observations related to the case can be also increased in order to accrue meaningful insights and implications.

14. TEST (3) Sophistication of an Independent Variable –This independent variable should be analyzed with three analytical frameworks such as contextual settings, actual interaction process and distributed gains, and ‘outcomes’ of socialization. –One of the existing explanations that Benjamin Cohen (2001) indicated gives some standards on what stimulates international monetary cooperation. A Shared Interest in Stability Institutionalized nature : Different National Monetary Policies Linkage to Other policies(  Issue Indivisibilities) Macroeconomic conditions: Crisis or Boom? The Number of Participants

15. TESTS (4) Modification of Analytical Framework – In the East Asian context, linkage to other policies seems not to explain how CMI was evolved into CMIM because in the East Asian context, Japan and China have the biggest ownership and influence in this governance structure evolved from CMI to CMIM. –Fierce competitions between two countries are basically derived from not linkage to other policies but issue indivisibilities such as territorial disputes and Chinese consumer’s boycott not to buy Japanese imports. –According to James Fearon, some issues, by their very natures, simply will not admit compromise. Fierce conflicts between two countries can arrive at the level in that war-prone international issues may often be effectively indivisible, but the cause of this indivisibility lies in domestic political and other mechanisms rather in the nature of the issues themselves.

16. TESTS (5) Issue Individualities –Indicator C was adjusted from Linkage to Other policies into Issue Indivisibilities at the expense of testing how fierce competitions between Japan and China can undermine international monetary cooperation in East Asia and slow down the evolution of regional monetary cooperation from CMI to CMIM and from CMIM to a highly ‘institutionalized’ form of international monetary cooperation. Conclusion –In this process-tracing methodology and ‘socialization’ framework, stability determinant [which factor involved in this ‘socialization’ can contribute to the success] and instability determinant [which factor involved in this ‘socialization’ can contribute to the failure] can be distinguished to obtain some implications for the historical dependence toward the future of ‘CMIM’.