The East Asian Dollar Standard, Fear of Floating, and Original Sin
Before the crisis of 1997/98, the East Asian economies-except for Japan but including China-pegged their currencies to the US dollar. To avoid further turmoil, the IMF argues that these currencies should float more freely. However, the authors' econometric estimations show that the dollar's predominant weight in East Asian currency baskets has returned to its pre-crisis levels. By 2002, the day-to-day volatility of each country's exchange rate against the dollar had again become negligible. Most governments were rapidly accumulating a "war chest" of official dollar reserves, which portends that this exchange rate stabilization will come to extend over months or quarters. From the doctrine of "original sin" applied to emerging-market economies, the authors argue that this fear of floating is entirely rational from the perspective of each individual country. And their joint pegging to the dollar benefits the East Asian dollar bloc as a whole, although Japan remains an important outlier. Copyright Blackwell Publishing Ltd 2004.
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.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 8 (2004)
Issue (Month): 3 (08)
|Contact details of provider:|| Web page: http://www.blackwellpublishing.com/journal.asp?ref=1363-6669|
|Order Information:||Web: http://www.blackwellpublishing.com/subs.asp?ref=1363-6669|
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.:
- John Williamson, 2000.
"Exchange Rate Regimes for Emerging Markets: Reviving the Intermediate Option,"
Peterson Institute Press: All Books,
Peterson Institute for International Economics, number pa60, December.
- John Williamson, 2000. "Exchange Rate Regimes for Emerging Markets: Reviving the Intermediate Option," Peterson Institute Press: Policy Analyses in International Economics, Peterson Institute for International Economics, number pa60, 03.
- Kawai, Masahiro, 2002. "Exchange Rate Arrangements in East Asia: Lessons from the 1997-98 Currency Crisis," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 20(S1), pages 167-204, December.
- 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.
- Carmen M. Reinhart, 2000. "Mirage of Floating Exchange Rates," American Economic Review, American Economic Association, vol. 90(2), pages 65-70, May.
- Peter Wickham, 2002. "Do "Flexible" Exchange Rates of Developing Countries Behave Like the Floating Exchange Rates of Industrialized Countries?," IMF Working Papers 02/82, International Monetary Fund.
- Ronald McKinnon & Gunther Schnabl, 2002. "Synchronized Business Cycles in East Asia: Fluctuations in the Yen/Dollar Exchange Rate and China’s Stabilizing Role," Working Papers 02010, Stanford University, Department of Economics.
- McKinnon, Ronald I & Pill, Huw, 1999.
"Exchange-Rate Regimes for Emerging Markets: Moral Hazard and International Overborrowing,"
Oxford Review of Economic Policy,
Oxford University Press, vol. 15(3), pages 19-38, Autumn.
- Ronald I. McKinnon & Huw Pill, 1999. "Exchange Rate Regimes for Emerging Markets: Moral Hazard and International Overborrowing," Working Papers 99018, Stanford University, Department of Economics.
- Stanley Fischer, 2001. "Exchange Rate Regimes: Is the Bipolar View Correct?," Journal of Economic Perspectives, American Economic Association, vol. 15(2), pages 3-24, Spring.
- Leonardo Hernández & Peter Montiel, 2002.
"Post-crisis exchange rate policy in five Asian countries: filling in the 'hollow middle'?,"
Federal Reserve Bank of San Francisco, issue Sep.
- Hernandez, Leonardo & Montiel, Peter J., 2003. "Post-crisis exchange rate policy in five Asian countries: Filling in the "hollow middle"?," Journal of the Japanese and International Economies, Elsevier, vol. 17(3), pages 336-369, September.
- Leonardo Hernández & Peter Montiel, 2001. "Post-Crisis Exchange Rate Policy in Five Asian Countries: Filling in the "Hollow Middle"?," Center for Development Economics 167, Department of Economics, Williams College.
- Leonardo HernÃ¡ndez & Peter Montiel, 2001. "Post-Crisis Exchange Rate Policy in Five Asian Countries; Filling in the "Hollow Middle"?," IMF Working Papers 01/170, International Monetary Fund.
- Leonardo HernÃ¡ndez & Peter Montiel, 2001. "Post-Crisis Exchange Rate Policy in Five Asian Countries: Filling in the Â“Hollow MiddleÂ”?," Department of Economics Working Papers 2001-05, Department of Economics, Williams College.
- Leonardo Hernández & Peter J. Montiel, 2002. "Post-crisis exchange rate policy in five Asian countries: filling in the "hollow middle"?," Pacific Basin Working Paper Series 2002-07, Federal Reserve Bank of San Francisco.
- Guillermo A. Calvo & Carmen M. Reinhart, 2000.
"Fear of Floating,"
NBER Working Papers
7993, National Bureau of Economic Research, Inc.
- Jeffrey A. Frankel & Shang-Jin Wei, 1992.
"Yen bloc or dollar bloc: exchange rate policies of the East Asian economies,"
Pacific Basin Working Paper Series
93-01, Federal Reserve Bank of San Francisco.
- Jeffrey A. Frankel & Shang-Jin Wei, 1994. "Yen Bloc or Dollar Bloc? Exchange Rate Policies of the East Asian Economies," NBER Chapters, in: Macroeconomic Linkage: Savings, Exchange Rates, and Capital Flows, NBER-EASE Volume 3, pages 295-333 National Bureau of Economic Research, Inc.
- Wei, S.J. & Frankel, J.A., 1992. "Yen Bloc or Dollar Bloc: Exchange Rate Policies of the East Asian Economies," Papers 92-08, University of Birmingham - International Financial Group.
- Andrew Berg & Paolo Mauro & Michael Mussa & Alexander K. Swoboda & Esteban Jadresic & Paul R. Masson, 2000. "Exchange Rate Regimes in an Increasingly Integrated World Economy," IMF Occasional Papers 193, International Monetary Fund.
- Rishi Goyal & Ronald McKinnon, 2002. "Japan's Negative Risk Premium in Interest Rates: The Liquidity Trap and Fall in Bank Lending," Working Papers 02006, Stanford University, Department of Economics.
- Slavi T. Slavov, 2005. "Should small open economies in East Asia put all their eggs in one basket: the role of balance sheet effects," International Finance 0501001, EconWPA.
- Ramikishen Rajan, 2002. "Exchange Rate Policy Options for Post-crisis Southeast Asia: Is There a Case for Currency Baskets?," The World Economy, Wiley Blackwell, vol. 25(1), pages 137-163, 01.
- Kawai, Masahiro & Akiyama, Shigeru, 2000. "Implications of the currency crisis for exchange rate arrangements in emerging East Asia," Policy Research Working Paper Series 2502, The World Bank.
- Reinhart, Carmen, 2000. "The mirage of floating exchange rates," MPRA Paper 13736, University Library of Munich, Germany.
- Takatoshi Ito & Anne O. Krueger, 1994. "Macroeconomic Linkage: Savings, Exchange Rates, and Capital Flows, NBER-EASE Volume 3," NBER Books, National Bureau of Economic Research, Inc, number ito_94-1, August.
- Kiyotaka Sato, 1999. "The International Use of the Japanese Yen: The Case of Japan's Trade with East Asia," The World Economy, Wiley Blackwell, vol. 22(4), pages 547-584, 06.
- Ronald I. McKinnon, 2001. "After the Crisis, The East Asian Dollar Standard Resurrected: An Interpretation of High Frequency Exchange Rate Pegging," Working Papers 042001, Hong Kong Institute for Monetary Research.
When requesting a correction, please mention this item's handle: RePEc:bla:rdevec:v:8:y:2004:i:3:p:331-360. 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: (Wiley-Blackwell Digital Licensing)or (Christopher F. Baum)
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.