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Monetary and Exchange Rate Stability in South East Asia

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Author Info
Christian Bauer ()
Bernhard Herz ()

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Abstract

Regaining exchange rate stability has been a major monetary policy goal of East Asian countries in the aftermath of the 1997/98 currency crisis. While most countries have abstained from re-establishing a formal US Dollar peg, they have typically managed the US Dollar exchange rate de facto. We show that most of these countries were able to regain their monetary credibility within a relatively short time period. The Argentine crisis in 2001 caused a minor setback in this process for some countries. We measure the credibility of monetary policy by separating the fundamental and excess volatility of the exchange rate on the basis of a chartist fundamentalist model. The degree of excess volatility is interpreted as the ability of the central bank to manage the exchange rate via the coordination channel.

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Article provided by Department of Economics, Economics I, Bayreuth University in its journal Macroeconomics.

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Handle: RePEc:uba:hadfwe:sea-bauer-herz-2006-08

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Related research
Keywords: monetary policy; exchange rate policy; credibility; technical trading; East Asia;

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Find related papers by JEL classification:
D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
F31 - International Economics - - International Finance - - - Foreign Exchange

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