The first paper, written by Professor Yung Chul Park and Barry Eichengreen, focuses on the impact on emerging markets of a disorderly adjustment in global imbalance. In the conclusion, they argue that commencing this adjustment process while global economic and financial conditions are still favorable will ease the adjustment process. They also state that the adjustment process will be eased if there is cooperation on exchange rate and other policies, and that it would be nice if the United States participated in this process of cooperative policy adjustment by addressing the domestic roots of its twin deficits. The second paper, co-authored by Professor Jong-Wha Lee and Warwick J. McKibbin, analyzes global imbalance, focusing on the investments and savings of East Asia and the United States. This paper demonstrates that since the 1997－98 crisis, many East Asian economies have been experiencing permanent declines of domestic investment and output growth, mainly resulting from increases in financial risk and decreases in the return on investment. According to the paper, the investment decline in East Asia, outside of China, combined with the fall in public and private savings in the United States, has contributed to the recent level of global current account imbalance. The third paper, written by Jacques Mazier, Yong Hyup Oh, and Sophie Saglio, focuses on analyzing the consequences of world imbalance on East Asian countries in the context of growing regional interdependency, and proceeds in two steps using in both cases simple multinational macroeconomic models. In the proceedings, exchange rates misalignments at the world level and for East Asian currencies are first estimated using a FEER approach, which combines a multinational model for the main currencies (dollar, yen, yuan, euro, and won), and a national model for the other East Asian currencies. This approach gives estimations in both real effective and bilateral exchange rates. Professor Eiji Ogawa points out in the fourth paper that global imbalance has occurred in relation to the huge current account deficits of the United States in recent years. These current account deficits have been caused by the fiscal deficit of the U.S. government since 2000. This is referred to as 'twin deficits,' which the United States experienced once before in the 1980s. When we look back at the latter half of the 80s, there was a large depreciation of the U.S. dollar, and given that the fiscal deficits have recently been kept at a higher level, we can assume that it may lead to a smilar result: the large depreciation of the U.S. dollar. The fifth paper, written by Yong Seoung Jung, Changyong Rhee, and Doo Yong Yang, is on the topic of 'Global Imbalance and Exchange Rate Adjustments: Korea.' Most agree that global imbalance should be rebalanced to a sustainable level. The main findings of this paper can be summarized as follows. First, the Korean won/U.S. dollar reached equilibrium in 2006 in response to the external imbalance of the Korean economy. Both econometric and model simulations show that the won/dollar rates in 2006 appreciated enough to reduce the previous current account surplus in Korea. (The rest is omitted.)

Preface

Executive Summary

I. Introduction

II. Global Imbalance and the Asian Economies
1. The Hard-Landing Scenario
2. Implications
3. What Countries Can Do
4. Is There Scope for Coordinated Policy Adjustments?
5. Conclusion

III. Domestic Investment and External Imbalance in East Asia
1. Introduction
2. Economic Performance in the East Asian Economies after the Financial Crisis
3. Global Current Account Imbalances
4. How to Adjust to the Imbalance
5. Concluding Remarks

IV. Exchange Rate Regimes, Misalignments, and Interdependency in East Asia
1. Introduction
2. Theoretical and Methodological Background
3. Exchange Rates Misalignments of East Asian Currencies
4. World Imbalances, Monetary Adjustments, and East AsianInterdependency
5. Conclusion

V. The Future of Exchange Rate Adjustment in East Asia: Is Plaza II Possible?: From the Japanese Experiences in the Plaza Accord
1. Introduction
2. How Much Depreciation of the US Dollar is Needed to Decrease the Current Account Deficit?
3. Japanese Experience with the Plaza Accord
4. Monetary Policy of the Bank of Japan after the Plaza Accord
5. Conclusion

VI. Global Imbalance and Exchange Rate Adjustments: Korea
1. Introduction
2. Behavioral Equilibrium Exchange Rate Approach
3. General Equilibrium Approach
4. Conclusion

VII. Global Imbalance and the Coordination of Exchange Rates:Korea
1. Introduction
2. Intervention and Sterilization in Korea
3. Intervention and Intra-regional Exchange Rate Stability
4. Implications for Monetary Cooperation in East Asia
5. Conclusion

VIII. Global Current Account Imbalances and Policy Implications for East Asia
1. Introduction
2. Monetary Policy
3. Fiscal Policy
4. Exchange Rate Policy
5. Structural Reform
6. Policy Issues for Korea