Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/316569 
Authors: 
Year of Publication: 
2020
Citation: 
[Journal:] East Asian Economic Review (EAER) [ISSN:] 2508-1667 [Volume:] 24 [Issue:] 1 [Year:] 2020 [Pages:] 89-124
Publisher: 
Korea Institute for International Economic Policy (KIEP), Sejong-si
Abstract: 
Even with the sizable Foreign Exchange (FX) holdings and good credit ratings of its top assets, Asia remains vulnerable to various shocks. This paper highlights the limited crossborder asset pledgeability as a significant factor for the lingering vulnerability in Asia. The dichotomy in asset holdings between pledgeable FX and non-pledgeable domestic assets in major economies in Asia has been the source of increasing stabilization costs as well as weakened market momentum in the region. Specifically, the peculiar feature of asset holdings in Asia reflects seriously deficient cross-border asset pledgeability that is left unaddressed. Asset pledgeability contributes toward financial stability via three channels: 1) capital market development by recognizing the role of collateral, 2) increased shock absorption capacity via collateral management, 3) and the newly activated safe asset provision. Therefore, it is crucial to go beyond the usual market development strategy and expand the overall asset pledgeability in the region that has remained unduly depressed.
Subjects: 
Cross-Border Collateral
Asset Pledgeability
Safe Asset Shortage
Financial Stability
PVAR (Panel Vector Autoregression)
Haircut
JEL: 
E40
E44
E50
F30
F34
G10
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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