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How Useful Is an Asian Currency Unit (ACU) Index for Surveillance in East Asia?

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  • Pontines, Victor

    (Asian Development Bank Institute)

Abstract

An Asian Currency Unit (ACU) index is constructed using an alternative procedure which minimizes a basket or portfolio of assets expressed in terms of national currencies. Using this estimated ACU Index and an ACU Deviation Indicator, the main finding of this study based on the current trajectory of East Asian currencies relative to this regional ACU average or benchmark, is that there is a formation of two contrasting groups of countries in the region—one a group of strong currencies and the other a group of weak currencies. We suggest several ways in which the region can capitalize on using this ACU index in the immediate term for surveillance purposes, particularly, for purposes of assessing “over- and undervaluation” of the individual currencies from the regional ACU average and for flagging emerging vulnerabilities in individual economies in the region.

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File URL: http://www.adbi.org/working-paper/2013/03/27/5575.acu.index.surveillance.east.asia/
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Bibliographic Info

Paper provided by Asian Development Bank Institute in its series ADBI Working Papers with number 413.

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Length: 33 pages
Date of creation: 29 Mar 2013
Date of revision:
Handle: RePEc:ris:adbiwp:0413

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Keywords: asian currency unit; acu index; amro; acu deviation indicator; beggar-thy-neighbor;

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Cited by:
  1. Richard Pomfret & Victor Pontines, 2013. "Exchange Rate Policy and Regional Trade Agreements : A Case of Conflicted Interests?," Trade Working Papers 23713, East Asian Bureau of Economic Research.
  2. Kawai, Masahiro & Pontines, Victor, 2014. "The Renminbi and Exchange Rate Regimes in East Asia," ADBI Working Papers 484, Asian Development Bank Institute.

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