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Fear of appreciation in East and Southeast Asia: The role of the Chinese renminbi

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  • Pontines, Victor
  • Siregar, Reza Y.

Abstract

Our study brings into light evidence of the important role of the Chinese renminbi in shaping the exchange rate behavior of a select group of East Asian currencies. Results obtained suggest that there is an additional dimension to the ‘fear of appreciation’ or ‘fear of floating-in-reverse’ behavior, initially coined by Levy-Yeyati and Sturzengger (2007) with regard to the experiences of this group of East Asian currencies. In particular, we find that there is a greater degree of aversion to appreciation of these East Asian currencies—specifically, the Philippine peso and the Thailand baht—against the Chinese renminbi than against the US dollar. This heightened fear of appreciation against the Chinese currency confirms that trade competition matters in this part of the world and that this fear to appreciate plays a central role in the exchange rate management of major East Asian currencies. As envisaged, the increasing role of China as a major trading hub in the region as well as globally, implies that the Chinese renminbi would exert a growing significant influence on other currencies in the region.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Asian Economics.

Volume (Year): 23 (2012)
Issue (Month): 4 ()
Pages: 324-334

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Handle: RePEc:eee:asieco:v:23:y:2012:i:4:p:324-334

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Web page: http://www.elsevier.com/locate/asieco

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Keywords: Asymmetrical exchange rate regime; East and Southeast Asia; Regime switching models; E58; F31; F41;

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Citations

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Cited by:
  1. Volz, Ulrich, 2013. "RMB internationalisation and currency co-operation in East Asia," Working Papers 125, University of Leipzig, Faculty of Economics and Management Science.
  2. Benkovskis, Konstantins & Wörz, Julia, 2013. "Non-price competitiveness of exports from emerging countries," Working Paper Series 1612, European Central Bank.
  3. Balasubramaniam, Vimal & Patnaik, Ila & Shah, Ajay, 2011. "Who cares about the Chinese Yuan?," Working Papers 11/89, National Institute of Public Finance and Policy.
  4. Chang Shu & Dong He & Xiaoqiang Cheng, 2014. "One Currency, Two Markets: The Renminbi's Growing Influence in Asia-Pacific," Working Papers 102014, Hong Kong Institute for Monetary Research.
  5. Pontines, Victor, 2013. "How Useful Is an Asian Currency Unit (ACU) Index for Surveillance in East Asia?," ADBI Working Papers 413, Asian Development Bank Institute.
  6. Vincent C.S. Lim & Victor Pontines, 2012. "Global Imbalances: A Primer," Staff Papers, South East Asian Central Banks (SEACEN) Research and Training Centre, number sp86, June.
  7. Subramanian Arvind & Kessler Martin, 2013. "The Renminbi Bloc is Here: Asia Down, Rest of the World to Go?," Journal of Globalization and Development, De Gruyter, vol. 4(1), pages 49-94, August.
  8. Pomfret, Richard & Pontines, Victor, 2013. "Exchange Rate Policy and Regional Trade Agreements: A Case of Conflicted Interests?," ADBI Working Papers 436, Asian Development Bank Institute.
  9. Andrew Filardo, 2012. "Ensuring price stability in post-crisis Asia: lessons from the recovery," BIS Working Papers 378, Bank for International Settlements.
  10. Siregar, Reza & Miyaki, Keita, 2013. "Regional Financial Arrangement: An Impetus for Regional Policy Cooperation," MPRA Paper 51050, University Library of Munich, Germany.

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