Advanced Search
MyIDEAS: Login to save this paper or follow this series

Managing Exchange Rate Volatility : A Comparative Counterfactual Analysis Of Singapore 1994 To 2003

Contents:

Author Info

  • Peter Wilson

    (SCAPE)

  • Henry Ng Shang Ren
Registered author(s):

    Abstract

    The objective of this paper is see how well Singapores exchange rate regime has coped with exchange rate volatility before and after the Asian financial crisis by comparing the performance of Singapores actual regime in minimising the volatility of the nominal effective exchange rate (NEER) and the bilateral rate against the US$ against some counterfactual regimes and the corresponding performance of eight other East Asian countries. In contrast to previous counterfactual exercises, such as Williamson (1998a) and Ohno (1999) which compute the weights for effective exchange rates on the basis of simple bloc aggregates, we apply a more disaggregated methodology using a larger number of trade partners. We also utilize ARCH/GARCH techniques to obtain estimates of heteroskedastic variances to better capture the time-varying characteristics of volatility for the actual and simulated exchange rate regimes. Our findings confirm that Singapores managed floating exchange rate system has delivered relatively low currency volatility. Although there are gains in volatility reduction for all countries in the sample from the adoption of either a unilateral or common basket peg, particularly post-crisis, these gains are relatively low for Singapore, largely because low actual volatility. Finally, there are additional gains for non-dollar peggers from stabilizing intra-EA exchange rates against the dollar if they were to adopt a basket peg, especially post-crisis, but the gains for Singapore are again relatively modest.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://www.eaber.org/node/22584
    Download Restriction: no

    Bibliographic Info

    Paper provided by East Asian Bureau of Economic Research in its series Macroeconomics Working Papers with number 22584.

    as in new window
    Length:
    Date of creation: Jan 2006
    Date of revision:
    Handle: RePEc:eab:macroe:22584

    Contact details of provider:
    Postal: JG Crawford Building #13, Asia Pacific School of Economics and Government, Australian National University, ACT 0200
    Web page: http://www.eaber.org
    More information through EDIRC

    Related research

    Keywords: East Asia; exchange rates; counterfactuals;

    Find related papers by JEL classification:

    References

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
    as in new window
    1. Flood, Robert P & Rose, Andrew K, 1998. "Understanding Exchange Rate Volatility Without the Contrivance of Macroeconomics," CEPR Discussion Papers, C.E.P.R. Discussion Papers 1944, C.E.P.R. Discussion Papers.
    2. McKenzie, Michael D, 1999. " The Impact of Exchange Rate Volatility on International Trade Flows," Journal of Economic Surveys, Wiley Blackwell, Wiley Blackwell, vol. 13(1), pages 71-106, February.
    3. Carmen M. Reinhart, 2000. "Mirage of Floating Exchange Rates," American Economic Review, American Economic Association, American Economic Association, vol. 90(2), pages 65-70, May.
    4. Guillermo A. Calvo & Carmen M. Reinhart, 2000. "Fear of Floating," NBER Working Papers, National Bureau of Economic Research, Inc 7993, National Bureau of Economic Research, Inc.
    5. Stanley Fischer, 2001. "Exchange Rate Regimes: Is the Bipolar View Correct?," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 15(2), pages 3-24, Spring.
    6. Graham Bird & Ramkishen Rajan, 2002. "Optimal currency baskets and the third currency phenomenon: exchange rate policy in Southeast Asia," Journal of International Development, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 14(8), pages 1053-1073.
    7. Barry Eichengreen, 2002. "Can Emerging Markets Float? Should They Inflation Target?," Working Papers Series, Central Bank of Brazil, Research Department 36, Central Bank of Brazil, Research Department.
    8. Peter Wilson, 2001. "Exchange Rates and the Trade Balance for Dynamic Asian Economies—Does the J-Curve Exist for Singapore, Malaysia, and Korea?," Open Economies Review, Springer, Springer, vol. 12(4), pages 389-413, October.
    9. Jeffrey A. Frankel, 1999. "No Single Currency Regime is Right for All Countries or At All Times," NBER Working Papers, National Bureau of Economic Research, Inc 7338, National Bureau of Economic Research, Inc.
    10. Luci Ellis, 2001. "Measuring the Real Exchange Rate: Pitfalls and Practicalities," RBA Research Discussion Papers, Reserve Bank of Australia rdp2001-04, Reserve Bank of Australia.
    11. Tony Cavoli & Ramkishen Rajan, 2003. "Exchange Rate Arrangements for East Asia Post-Crisis: Examining the Case for Open Economy Inflation Targeting," Centre for International Economic Studies Working Papers, University of Adelaide, Centre for International Economic Studies 2003-10, University of Adelaide, Centre for International Economic Studies.
    12. Agnès Bénassy-Quéré, 1996. "Exchange Rate Regimes and Policies in Asia," Working Papers, CEPII research center 1996-07, CEPII research center.
    13. Lafrance, Robert & Osakwe, Patrick & St-Amant, Pierre, 1998. "Evaluating Alternative Measures of the Real Effective Exchange Rate," Working Papers, Bank of Canada 98-20, Bank of Canada.
    14. Bayoumi, Tamim & Eichengreen, Barry, 1998. "Exchange Rate Volatility and Intervention: Implications of the Theory of Optimum Currency Areas," CEPR Discussion Papers, C.E.P.R. Discussion Papers 1982, C.E.P.R. Discussion Papers.
    15. Ahmet N. Kipici & Mehtap Kesriyeli, 2000. "The real exchange rate definitions and calculations," Working Papers, Research and Monetary Policy Department, Central Bank of the Republic of Turkey 0001, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
    16. Ramikishen Rajan, 2002. "Exchange Rate Policy Options for Post-crisis Southeast Asia: Is There a Case for Currency Baskets?," The World Economy, Wiley Blackwell, Wiley Blackwell, vol. 25(1), pages 137-163, 01.
    17. Yoshino, Naoyuki & Kaji, Sahoko & Suzuki, Ayako, 2004. "The basket-peg, dollar-peg, and floating: A comparative analysis," Journal of the Japanese and International Economies, Elsevier, Elsevier, vol. 18(2), pages 183-217, June.
    18. Williamson, John, 1998. "Crawling Bands or Monitoring Bands: How to Manage Exchange Rates in a World of Capital Mobility," International Finance, Wiley Blackwell, Wiley Blackwell, vol. 1(1), pages 59-79, October.
    19. Tim Bollerslev, 1986. "Generalized autoregressive conditional heteroskedasticity," EERI Research Paper Series, Economics and Econometrics Research Institute (EERI), Brussels EERI RP 1986/01, Economics and Econometrics Research Institute (EERI), Brussels.
    20. Wei, S.J. & Frankel, J.A., 1992. "Yen Bloc or Dollar Bloc: Exchange Rate Policies of the East Asian Economies," Papers, University of Birmingham - International Financial Group 92-08, University of Birmingham - International Financial Group.
    21. Ramkishen S. Rajan & Reza Siregar, 2002. "Choice of Exchange Rate Regime: Currency Board (Hong Kong) or Monitoring Band (Singapore)?," Australian Economic Papers, Wiley Blackwell, Wiley Blackwell, vol. 41(4), pages 538-556, December.
    22. corrinne ho & robert n mccauley, 2004. "Living with flexible exchange rates:," International Finance, EconWPA 0411003, EconWPA.
    23. Peter B. Clark & Ronald MacDonald, 2000. "Filtering the Beer," IMF Working Papers, International Monetary Fund 00/144, International Monetary Fund.
    24. Reinhart, Carmen, 2000. "The mirage of floating exchange rates," MPRA Paper, University Library of Munich, Germany 13736, University Library of Munich, Germany.
    25. Kwan, C. H., 1998. "The theory of optimum currency areas and the possibility of forming a yen bloc in Asia," Journal of Asian Economics, Elsevier, Elsevier, vol. 9(4), pages 555-580.
    26. Taimur Baig, 2001. "Characterizing Exchange Rate Regimes in Post-Crisis East Asia," IMF Working Papers, International Monetary Fund 01/152, International Monetary Fund.
    Full references (including those not matched with items on IDEAS)

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:eab:macroe:22584. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Shiro Armstrong).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.