Much of the past literature on the use of monetary policy instruments by central banks in East Asia has focused on three main areas. These have been adjustments in commercial bank reserve requirements or liquidity ratios, central bank discount policy, and the use of various direct controls such as ceilings on the amount of commercial bank credit expansion. Less attention has been paid to central banks' use of money market instruments in the conduct of monetary policy. Yet, this is an important area, particularly since six of the eight major East Asian developing economies have utilized money market instruments of one type or another since the early 1980s in achieving their monetary policy objectives. This shift to greater use of money market instruments and, hence,open market operations, has been accompanied by the central banks' issuance of their own debt instruments.

This paper examines the six East Asian developing economies that have utilized money market instruments during the past decade as either a major monetary policy instrument or as a supplement to other instruments in the pursuit of monetary policy objectives. The six economies covered are the Philippines, Korea, Taiwan, Indonesia, Thailand and Hong Kong. Malaysia and Singapore are excluded as neither has made much, if any, use of money market instruments in their conduct of monetary policy.

It is hoped that through an examination of the specific experiences of these economies with the use of money market instruments in carrying out monetary policy, that some insights can be gained as to which approaches and instruments are likely to be successful in achieving the authorities' monetary policy objectives. Equally important is to gain an understanding of what conditions are needed in order to undertake successful operations with these money market instruments. The concluding section contains some of the reasons why open market operations in the case of truly viable money market instruments, are more advantageous than the three other traditional instruments cited earlier. B- Individual Countries' Use of Money Market Instruments.

With the exception of Hong Kong and the Philippines, all of the six economies employ money market instruments that constitute some type of central bank obligation, rather than a national government, or federal treasury, obligation such as a treasury bill. The main reasons for this will be detailed later. In the case of Hong Kong, this overseas territory of the United Kingdom has no central bank. However, in recent years, the territory's Exchange Fund has had its powers of control over bank liquidity strengthened, and in March 1990, the Exchange Fund began to issue its own Exchange Fund bills. Currently the Central Bank of the Philippines uses national government treasury bills in its open market operations, but earlier during 1984-87 the Central Bank issued its own obligations—popularly known as "Jobo" bills after Central Bank Governor Jose B. Fernandez, Jr.--to mop up excess liquidity in the commercial banking system. However, the focus in this paper will be on the Central Bank's current use of treasury bills in its open market operations and not the "Jobo" bills.

The' situation in each of the six economies differs, either in terms of the nature of the central bank obligation, its name, or how it is employed in the pursuit of the central bank's monetary policy objectives. Thus it is appropriate to examine each economy separately. This is done chronologically, depending on the date when the money market instrument was first introduced. The earliest instrument is the Philippine treasury bill (1966) and the most recent is Hong Kong's Exchange Fund bill (March 1990).

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