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Yen-synchronization of floating East Asian currencies: A regime-switching regression model and micro-structural analysis

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  • Kim, Bong-Han
  • Min, Hong-Ghi
  • McDonald, Judy
  • Hwang, Young-Soon

Abstract

Using a regime-switching regression model, we find evidence of synchronization between the Swiss-franc exchange rates of floating East Asian currencies and the Swiss-franc–Japanese-yen exchange rate over the period 1999–2006. The volatility of Swiss-franc–East-Asian currencies’ exchange rates is higher during the synchronization period than during the de-synchronization period. Contrary to traditional arguments concerning the yen-bloc, we find that the Export-Similarity Index and Foreign Portfolio Investment between Japan and East Asian countries are the two main determinants of yen-synchronization in the region. Finally, micro-structural analysis shows that the weeks of synchronization is greater when the yen is strong for Korea and Taiwan, but there are no asymmetric responses for Thailand, Indonesia, or the Philippines.

Suggested Citation

  • Kim, Bong-Han & Min, Hong-Ghi & McDonald, Judy & Hwang, Young-Soon, 2012. "Yen-synchronization of floating East Asian currencies: A regime-switching regression model and micro-structural analysis," Journal of the Japanese and International Economies, Elsevier, vol. 26(2), pages 221-232.
  • Handle: RePEc:eee:jjieco:v:26:y:2012:i:2:p:221-232
    DOI: 10.1016/j.jjie.2012.01.002
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    References listed on IDEAS

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    Cited by:

    1. repec:bok:journl:v:18:y:2012:i:4:p:1-22 is not listed on IDEAS
    2. Keddad, Benjamin, 2016. "How do the Renminbi and other East Asian currencies co-move?," MPRA Paper 83782, University Library of Munich, Germany.
    3. Hyeongwoo Kim & Young-Kyu Moh, 2012. "The Yen Real Exchange Rate May Not be Stationary After All: New Evidence from Non-linear Unit-Root Tests," Economic Analysis (Quarterly), Economic Research Institute, Bank of Korea, vol. 18(4), pages 1-22, December.

    More about this item

    Keywords

    Export similarity; Foreign Portfolio Investment; FDI; Yen-synchronization; Markov-switching regression model; Yen bloc;

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements

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