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Economic Shocks And Exchange Rate As A Shock Absorber In Indonesia And Thailand

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  • Siwei Goo
  • Reza Siregar

Abstract

This study investigates the requirement for the exchange rate to be a shock absorber in Indonesia and Thailand from 1986 to 2007. In general, we find that the economic shocks have predominantly been asymmetric relative to the US and the Japanese economies. Yet, the weights attached to the US dollar remain respectably high in the exchange rate management of the rupiah and the baht, in particular for the latter currency, during the post-1997 crisis. Hence, relinquishing the role of the exchange rate as a shock absorber has been costly during both the pre-and the post-1997 crisis periods for these Southeast Asian countries. Furthermore, it is arguably more costly for Thailand during the post-1997, and for Indonesia during the pre-1997 crisis.

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This book is provided by South East Asian Central Banks (SEACEN) Research and Training Centre in its series Staff Papers with number sp72 and published in 2009.

ISBN: 983-9478-77-X
Handle: RePEc:sea:spaper:sp72

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Cited by:
  1. Nasha Ananchotikul & Nuwat Nookhwun & Paiboon Pongpaichet & Songklod Rastapana & Phurichai Rungcharoenkitkul, 2010. "The Future of Monetary Policy: Roles of Financial Stability and Exchange Rate," Working Papers 2010-07, Economic Research Department, Bank of Thailand.

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