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Asian Currency Unit (ACU), deviation indicators and exchange rate coordination in East Asia: A panel-based convergence approach

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  • Pontines, Victor
  • You, Kefei

Abstract

Employing the panel convergence method of Phillips and Sul (2007) to the nominal deviation indicators of two recent unofficial constructions of an Asian Currency Unit (ACU) index, this paper examines the existence and extent of convergence in the movements of East Asian currencies against the ACU. Empirical results reveal that intra-East Asian exchange rate movements have not converged to form one, cohesive and unified bloc where currencies share homogenous movements, regardless of whether one examines the data on intra-East Asian exchange rate movements before or after the collapse of Lehman Brothers in September 2008. Instead, a separate number of convergent clubs or blocs in the region have formed in recent years. Finally, and most importantly, we observe at the end of the period of our examination that economies in the region are, generally, converging at different speeds to two opposing poles of convergence, that is, groups of relatively depreciating currencies and, on the other, groups of relatively appreciating currencies.

Suggested Citation

  • Pontines, Victor & You, Kefei, 2015. "Asian Currency Unit (ACU), deviation indicators and exchange rate coordination in East Asia: A panel-based convergence approach," Japan and the World Economy, Elsevier, vol. 36(C), pages 42-55.
  • Handle: RePEc:eee:japwor:v:36:y:2015:i:c:p:42-55
    DOI: 10.1016/j.japwor.2015.06.002
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    References listed on IDEAS

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    1. Peter C. B. Phillips & Donggyu Sul, 2009. "Economic transition and growth," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 24(7), pages 1153-1185, November.
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    More about this item

    Keywords

    ASEAN+3 and Hong Kong; China; Asian currency unit; Nominal deviation indicators; Panel convergence test; F31; F36; C33;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models

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