Exchange Rate Regimes in East Asia after the Crisis: Implications from Intra-daily Data

The purpose of this paper is to investigate what affected the post-crisis exchange rates of five East Asian countries: Singapore, Thailand, Korea, Taiwan, and Malaysia. Based on intra-daily observations, we examine how and when these five East Asian currencies changed their correlations with the U.S. dollar and the Japanese yen. During the time zones when East Asian markets were closed, the East Asian currencies kept strong correlations with the U.S. dollar throughout the pos-crisis period. We, however, find structural breaks in the correlations during the time zones when East Asian markets were open. In the post-crisis period, the first structural break arose when Malaysia adopted the fixed exchange rate. The second structural break occurred when Indonesia and Thailand introduced inflation targeting. The structural breaks suggest strong monetary and real linkage among East Asian countries. After early 2000, the East Asian currencies increased correlations with the U.S. dollar and began reverting back to de facto pegs against the U.S. dollar in terms of their growth rates.