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Choice of Anchor Currencies and Dynamic Preferences for Exchange Rate Pegging in Asia

Author

Listed:
  • Syed Kumail Abbas Rizvi

    () (Associate Professor of Finance, Lahore School of Economics, Pakistan.)

  • Bushra Naqvi

    () (Assistant Professor of Finance, Lahore University of Management Sciences, Pakistan.)

  • Nawazish Mirza

    () (Associate Professor of Finance, Lahore School of Economics, Pakistan.)

Abstract

This paper attempts to answer two important questions in the context of Asian exchange rate regimes with respect to the choice of anchor currencies and dynamic preferences for exchange rate pegging. According to our results, the US dollar is the first choice of a de facto peg for many countries such as China, Hong Kong, the Philippines, and Pakistan. Other countries, apart from Korea and Indonesia, seem to prefer a basket peg comprising two or more anchor currencies with rapidly increasing weight attached to the euro. This shift from the US dollar to the euro reflects changes in the choices, preferences, and policies of these economies as a result of varying macroeconomic and global financial realities.

Suggested Citation

  • Syed Kumail Abbas Rizvi & Bushra Naqvi & Nawazish Mirza, 2013. "Choice of Anchor Currencies and Dynamic Preferences for Exchange Rate Pegging in Asia," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 18(2), pages 37-49, July-Dec.
  • Handle: RePEc:lje:journl:v:18:y:2013:i:2:p:37-49
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    References listed on IDEAS

    as
    1. Michael J. Dueker & Andreas M. Fischer, 2001. "The mechanics of a successful exchange rate peg: lessons for emerging markets," Review, Federal Reserve Bank of St. Louis, issue May, pages 47-56.
    2. Bracke, Thierry & Bunda, Irina, 2011. "Exchange rate anchoring - Is there still a de facto US dollar standard?," Working Paper Series 1353, European Central Bank.
    3. Jeffrey A. Frankel & Shang-Jin Wei, 2007. "Assessing China's exchange rate regime," Economic Policy, CEPR;CES;MSH, vol. 22, pages 575-627, July.
    4. 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.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Exchange rate regime; flexibility; pegging; Asia.;

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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