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Assessing Asian Exchange Rates Coordination under Regional Currency Basket System

  • Benjamin Keddad

    ()

    (Aix-Marseille University (Aix-Marseille School of Economics), CNRS & EHESS)

In this paper, I examine the extent to which the Asian exchange rates are coordinated around a synthetic Asian Currency Unit (ACU) defined as a basket of the Asian currencies. Using a VAR model, the results provide some evidence of stabilization among the 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 where the Asian currencies have gained an increasing role. The empirical results also suggest that the official adoption of an undisclosed currency basket by 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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File URL: http://www.amse-aixmarseille.fr/sites/default/files/_dt/2012/wp_2013_-_nr_45.pdf
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Paper provided by Aix-Marseille School of Economics, Marseille, France in its series AMSE Working Papers with number 1345.

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Length: 18 pages
Date of creation: Sep 2013
Date of revision: Sep 2013
Handle: RePEc:aim:wpaimx:1345
Contact details of provider: Web page: http://www.amse-aixmarseille.fr/en

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  1. Thorbecke, Willem, 2008. "The effect of exchange rate volatility on fragmentation in East Asia: Evidence from the electronics industry," Journal of the Japanese and International Economies, Elsevier, vol. 22(4), pages 535-544, December.
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  7. Ronald McKinnon & Gunther Schnabl, 2004. "The Return to Soft Dollar Pegging in East Asia. Mitigating Conflicted Virtue," International Finance 0406007, EconWPA, revised 07 Jul 2004.
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