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Exchange rate coordination in Asia under regional currency basket systems

  • Benjamin Keddad

    ()

    (Aix-Marseille Université (Aix-Marseille School of Economics))

In this paper, I examine to what extent Asian exchange rates are coordinated around a synthetic Asian Currency Unit (ACU) defined as a basket of Asian currencies. Using a VAR model, the results provide some evidence of stabilization among Asian exchange rates around the ACU. Although the US dollar remains the dominant anchor within the region, these countries have allowed for more exchange rate flexibility against the US dollar since 2006, with the aim to adopt a basket peg in which Asian currencies have gained an increasing role. The empirical results also suggest that the official adoption of an undisclosed currency basket by the Chinese authorities in July 2005 has been an important factor in the decision of Asian countries to shift toward a de facto currency basket system.

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Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 33 (2013)
Issue (Month): 4 ()
Pages: 2913-2929

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Handle: RePEc:ebl:ecbull:eb-13-00305
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  1. Guonan Ma & Robert McCauley, 2010. "The evolving renminbi regime and implications for Asian currency stability," BIS Working Papers 321, Bank for International Settlements.
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  4. Ronald I. McKinnon, . "Exchange Rate Coordination for Surmounting the East Asian Currency Crises," Working Papers 98010, Stanford University, Department of Economics.
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  9. BAI, Jushan & PERRON, Pierre, 1998. "Computation and Analysis of Multiple Structural-Change Models," Cahiers de recherche 9807, Universite de Montreal, Departement de sciences economiques.
  10. Chit, Myint Moe & Rizov, Marian & Willenbockel, Dirk, 2008. "Exchange Rate Volatility and Exports: New Empirical Evidence from the Emerging East Asian Economies," MPRA Paper 9014, University Library of Munich, Germany.
  11. THORBECKE, Willem, 2008. "The Effect of Exchange Rate Volatility on Fragmentation in East Asia: Evidence from the Electronics Industry," Discussion papers 08016, Research Institute of Economy, Trade and Industry (RIETI).
  12. 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., vol. 14(8), pages 1053-1073.
  13. Yung Chul Park, 2010. "RMB Internationalization and Its Implications for Financial and Monetary Cooperation in East Asia," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 18(2), pages 1-21.
  14. Peter Wilson & Henry Ng Shang Ren, 2007. "The Choice of Exchange Rate Regime and the Volatility of Exchange Rates after the Asian Crisis: A Counterfactual Analysis," The World Economy, Wiley Blackwell, vol. 30(11), pages 1646-1661, November.
  15. Eiji Ogawa & Junko Shimizu, 2006. "Stabilization of Effective Exchange Rates Under Common Currency Basket Systems," NBER Working Papers 12198, National Bureau of Economic Research, Inc.
  16. Benassy-Quere, Agnes, 1999. "Optimal Pegs for East Asian Currencies," Journal of the Japanese and International Economies, Elsevier, vol. 13(1), pages 44-60, March.
  17. Ogawa, Eiji & Shimizu, Junko, 2006. "Stabilization of effective exchange rates under common currency basket systems," Journal of the Japanese and International Economies, Elsevier, vol. 20(4), pages 590-611, December.
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