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Fear of Appreciation in East and Southeast Asia: The Role of the Chinese Renminbi

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  • Victor Pontines
  • Reza Y. Siregar

Abstract

The study brings into light the evidence of a fundamental role of the Chinese renminbi in shaping the exchange rate behaviour of other major Asian currencies. The results obtained suggest that there is an additional dimension to the ‘fear of appreciation’ or ‘fear of floating-in-reverse’ behaviour, initially coined by Levy-yeyati and Sturzenegger (2007) with regard to the cases of these major Asian currencies. In particular, it is found that there is a greater degree of aversion to appreciation of these same Asian currencies, specifically, the Philippine peso and the Thailand baht against the renminbi than against the US dollar. This heightened fear of appreciation against the Chinese currency confirms that trade competition indeed matters in this part of the world and that the fear continues to play a central role in the exchange rate management behaviour of major Asian currencies. This is understandable as the rising role of China as a major trading hub in the region as well as globally, renders greater influence to the renminbi on the rest of the currencies in the region.

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Bibliographic Info

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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 sp78 and published in 2010.

Handle: RePEc:sea:spaper:sp78

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References

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  6. William H. Branson & Conor N. Healy, 2005. "Monetary and Exchange Rate Policy Coordination in ASEAN 1," NBER Working Papers 11713, National Bureau of Economic Research, Inc.
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  11. Hyginus Leon & Serineh Najarian, 2005. "Asymmetric adjustment and nonlinear dynamics in real exchange rates," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 10(1), pages 15-39.
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  14. Ramachandran, M. & Srinivasan, Naveen, 2007. "Asymmetric exchange rate intervention and international reserve accumulation in India," Economics Letters, Elsevier, vol. 94(2), pages 259-265, February.
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  16. Pontines, Victor & Rajan, Ramkishen S., 2011. "Foreign exchange market intervention and reserve accumulation in emerging Asia: Is there evidence of fear of appreciation?," Economics Letters, Elsevier, vol. 111(3), pages 252-255, June.
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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. Balasubramaniam, Vimal & Patnaik, Ila & Shah, Ajay, 2011. "Who cares about the Chinese Yuan?," Working Papers 11/89, National Institute of Public Finance and Policy.
  3. 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.
  4. Benkovskis, Konstantins & Wörz, Julia, 2012. "Non-price competitiveness of exports from emerging countries," BOFIT Discussion Papers 19/2012, Bank of Finland, Institute for Economies in Transition.
  5. Victor Pontines, 2013. "How Useful Is an Asian Currency Unit (ACU) Index for Surveillance in East Asia?," Governance Working Papers 23398, East Asian Bureau of Economic Research.
  6. Andrew Filardo, 2012. "Ensuring price stability in post-crisis Asia: lessons from the recovery," BIS Working Papers 378, Bank for International Settlements.
  7. Arvind Subramanian & Martin Kessler, 2012. "The Renminbi Bloc is Here: Asia Down, Rest of the World to Go?," Working Paper Series WP12-19, Peterson Institute for International Economics, revised 2013.
  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. Siregar, Reza & Miyaki, Keita, 2013. "Regional Financial Arrangement: An Impetus for Regional Policy Cooperation," MPRA Paper 51050, University Library of Munich, Germany.
  10. Chang Shu & Dong He & Xiaoqiang Cheng, 2014. "One currency, two markets: the renminbi’s growing influence in Asia-Pacific," BIS Working Papers 446, Bank for International Settlements.
  11. 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.

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