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The Exchange Rate Regime in Asia: From Crisis to Crisis

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  • Ajay Shah

    ()

  • Ila Patnaik

    ()

  • Anmol Sethy
  • Vimal Balasubramaniam

Abstract

Prior to the Asian financial crisis, most Asian exchange rates were de facto pegged to the US Dollar. In the crisis, many economies experienced a brief period of extreme flexibility. A `fear of floating' gave reduced flexibility when the crisis subsided, but flexibility after the crisis was greater than that seen prior to the crisis. Contrary to the idea of a durable Bretton Woods II arrangement, Asia then went on to slowly raise flexibility and reduce the role for the US Dollar. When the period from April 2008 to December 2009 is compared against periods of high in flexibility, from January 1991 to November 1991 and October 1995 to March 1997, the increase in flexibility is economically and statistically significant. This paper proposes a new measure of dollar pegging, the \Bretton Woods II score". [NIPFP WP No. 69].

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Bibliographic Info

Paper provided by eSocialSciences in its series Working Papers with number id:2582.

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Date of creation: Jun 2010
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Handle: RePEc:ess:wpaper:id:2582

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Related research

Keywords: flexibility; korea; economically; Exchange rate regime; Asia; Bretton Woods II hypothesis; dollar; pegging; US; Asia; financial crisis; china; India; macroeconomic policy; monetary policy;

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References

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  1. Barry Eichengreen & Ricardo Hausmann, 1999. "Exchange rates and financial fragility," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 329-368.
  2. Ajay Shah & Ila Patnaik, 2009. "Does the Currency Regime Shape Unhedged Currency Exposure?," Working Papers id:2049, eSocialSciences.
  3. Guillermo A. Calvo & Carmen M. Reinhart, 2002. "Fear Of Floating," The Quarterly Journal of Economics, MIT Press, vol. 117(2), pages 379-408, May.
  4. BAI, Jushan & PERRON, Pierre, 1998. "Computation and Analysis of Multiple Structural-Change Models," Cahiers de recherche 9807, Universite de Montreal, Departement de sciences economiques.
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  6. Reinhart, Carmen & Rogoff, Kenneth, 2004. "The modern history of exchange rate arrangements: A reinterpretation," MPRA Paper 14070, University Library of Munich, Germany.
  7. Zeileis, Achim & Shah, Ajay & Patnaik, Ila, 2010. "Testing, monitoring, and dating structural changes in exchange rate regimes," Computational Statistics & Data Analysis, Elsevier, vol. 54(6), pages 1696-1706, June.
  8. Gian-Maria Milesi-Ferretti & Philip R. Lane, 2005. "Financial Globalization and Exchange Rates," IMF Working Papers 05/3, International Monetary Fund.
  9. Michael Dooley & David Folkerts-Landau & Peter Garber, 2005. "An essay on the revived Bretton Woods system," Proceedings, Federal Reserve Bank of San Francisco, issue Feb.
  10. Dani Rodrik, 2008. "The Real Exchange Rate and Economic Growth," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 39(2 (Fall)), pages 365-439.
  11. Ricardo Hausmann & Michael Gavin & Carmen Pagés-Serra & Ernesto H. Stein, 1999. "Financial Turmoil and Choice of Exchange Rate Regime," Research Department Publications 4170, Inter-American Development Bank, Research Department.
  12. Sebastian Edwards, 2001. "Exchange Rate Regimes, Capital Flows and Crisis Prevention," NBER Working Papers 8529, National Bureau of Economic Research, Inc.
  13. Annamaria Kokenyne & Romain Veyrune & Karl Friedrich Habermeier & Harald Anderson, 2009. "Revised System for the Classification of Exchange Rate Arrangements," IMF Working Papers 09/211, International Monetary Fund.
  14. Levy-Yeyati, Eduardo & Sturzenegger, Federico, 2005. "Classifying exchange rate regimes: Deeds vs. words," European Economic Review, Elsevier, vol. 49(6), pages 1603-1635, August.
  15. Benassy-Quere, Agnes & Coeure, Benoit & Mignon, Valerie, 2006. "On the identification of de facto currency pegs," Journal of the Japanese and International Economies, Elsevier, vol. 20(1), pages 112-127, March.
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Citations

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Cited by:
  1. Aizenman, Joshua & Sengupta, Rajeswari, 2012. "The Financial Trilemma in China and a Comparative Analysis with India," Santa Cruz Department of Economics, Working Paper Series qt2xn3238g, Department of Economics, UC Santa Cruz.
  2. Tsen, Wong Hock, 2011. "The real exchange rate determination: An empirical investigation," International Review of Economics & Finance, Elsevier, vol. 20(4), pages 800-811, October.
  3. Bhattacharya, Rudrani & Patnaik,Ila, 2014. "Monetary policy analysis in an inflation targeting framework in emerging economies: The case of India," Working Papers 14/131, National Institute of Public Finance and Policy.
  4. Ila Patnaik & Ajay Shah, 2012. "Did the Indian Capital Controls Work as a Tool of Macroeconomic Policy?," IMF Economic Review, Palgrave Macmillan, vol. 60(3), pages 439-464, September.
  5. Lee, Hei Wai & Xie, Yan Alice & Yau, Jot, 2011. "The impact of sovereign risk on bond duration: Evidence from Asian sovereign bond markets," International Review of Economics & Finance, Elsevier, vol. 20(3), pages 441-451, June.
  6. Balasubramaniam, Vimal & Patnaik, Ila & Shah, Ajay, 2011. "Who cares about the Chinese Yuan?," Working Papers 11/89, National Institute of Public Finance and Policy.
  7. repec:pra:mprapa:39771 is not listed on IDEAS
  8. Yeh, Kuo-chun, 2012. "Renminbi in the future international monetary system," International Review of Economics & Finance, Elsevier, vol. 21(1), pages 106-114.
  9. Ibragimov, Marat & Ibragimov, Rustam & Kattuman, Paul, 2013. "Emerging markets and heavy tails," Journal of Banking & Finance, Elsevier, vol. 37(7), pages 2546-2559.
  10. Ila Patnaik & Ajay Shah, 2011. "India's financial globalisation," IMF Working Papers 11/7, International Monetary Fund.
  11. Moore, Tomoe & Wang, Ping, 2014. "Dynamic linkage between real exchange rates and stock prices: Evidence from developed and emerging Asian markets," International Review of Economics & Finance, Elsevier, vol. 29(C), pages 1-11.
  12. Bonatti, Luigi & Fracasso, Andrea, 2013. "Hoarding of international reserves in China: Mercantilism, domestic consumption and US monetary policy," Journal of International Money and Finance, Elsevier, vol. 32(C), pages 1044-1078.
  13. Sen Gupta, Abhijit & Sengupta, Rajeswari, 2013. "Management of Capital Flows in India: 1990-2011," MPRA Paper 46217, University Library of Munich, Germany.
  14. Jin, Hailong & Choi, E Kwan, 2013. "Profits and Losses from Currency Intervention," Staff General Research Papers 37378, Iowa State University, Department of Economics.
  15. Bonatti, Luigi & Fracasso, Andrea, 2014. "Modeling the Transition Towards Renminbi's Full Convertibility: Implications for China’s Growth," MPRA Paper 54129, University Library of Munich, Germany.
  16. Jin, Hailong & Choi, E. Kwan, 2013. "Profits and losses from currency intervention," International Review of Economics & Finance, Elsevier, vol. 27(C), pages 14-20.

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