IDEAS home Printed from https://ideas.repec.org/p/aim/wpaimx/1345.html
   My bibliography  Save this paper

Assessing Asian Exchange Rates Coordination under Regional Currency Basket System

Author

Listed:
  • Benjamin Keddad

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

Abstract

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.

Suggested Citation

  • Benjamin Keddad, 2013. "Assessing Asian Exchange Rates Coordination under Regional Currency Basket System," AMSE Working Papers 1345, Aix-Marseille School of Economics, France, revised Sep 2013.
  • Handle: RePEc:aim:wpaimx:1345
    as

    Download full text from publisher

    File URL: http://www.amse-aixmarseille.fr/sites/default/files/_dt/2012/wp_2013_-_nr_45.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Ogawa, Eiji & Ito, Takatoshi, 2002. "On the Desirability of a Regional Basket Currency Arrangement," Journal of the Japanese and International Economies, Elsevier, vol. 16(3), pages 317-334, September.
    2. Jushan Bai & Pierre Perron, 1998. "Estimating and Testing Linear Models with Multiple Structural Changes," Econometrica, Econometric Society, vol. 66(1), pages 47-78, January.
    3. 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.
    4. Ma, Guonan & McCauley, Robert N., 2011. "The evolving renminbi regime and implications for Asian currency stability," Journal of the Japanese and International Economies, Elsevier, vol. 25(1), pages 23-38, March.
    5. Masahiro Kawai & Shinji Takagi, 2005. "Towards regional monetary cooperation in East Asia: lessons from other parts of the world," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 10(2), pages 97-116.
    6. Ronald McKinnon & Gunther Schnabl, 2004. "The Return to Soft Dollar Pegging in East Asia: Mitigating Conflicted Virtue," International Finance, Wiley Blackwell, vol. 7(2), pages 169-201, July.
    7. V. Coudert & C. Couharde & V. Mignon, 2013. "Pegging emerging currencies in the face of dollar swings," Applied Economics, Taylor & Francis Journals, vol. 45(36), pages 5076-5085, December.
    8. 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.
    9. 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, pages 295-333, National Bureau of Economic Research, Inc.
    10. Myint Moe Chit & Marian Rizov & Dirk Willenbockel, 2010. "Exchange Rate Volatility and Exports: New Empirical Evidence from the Emerging East Asian Economies," The World Economy, Wiley Blackwell, vol. 33(2), pages 239-263, February.
    11. Kawai, Masahiro, 2002. "Exchange Rate Arrangements in East Asia: Lessons from the 1997-98 Currency Crisis," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 20(S1), pages 167-204, December.
    12. Ito, Takatoshi & Ogawa, Eiji & Sasaki, Yuri Nagataki, 1998. "How Did the Dollar Peg Fail in Asia?," Journal of the Japanese and International Economies, Elsevier, vol. 12(4), pages 256-304, December.
    13. Eiji Ogawa & Junko Shimizu, 2006. "AMU Deviation Indicators for Coordinated Exchange Rate Policies in East Asia and their Relationships with Effective Exchange Rates," The World Economy, Wiley Blackwell, vol. 29(12), pages 1691-1708, December.
    14. Ronald I. McKinnon, 1999. "Exchange rate co-ordination for surmounting the East Asian currency crises," Journal of International Development, John Wiley & Sons, Ltd., vol. 11(1), pages 95-106.
    15. Marcel Fratzscher & Arnaud Mehl, 2014. "China's Dominance Hypothesis and the Emergence of a Tri‐polar Global Currency System," Economic Journal, Royal Economic Society, vol. 124(581), pages 1343-1370, December.
    16. Kenen,Peter B. & Meade,Ellen E., 2008. "Regional Monetary Integration," Cambridge Books, Cambridge University Press, number 9780521711500, February.
    17. 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, March.
    18. 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.
    19. 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.
    20. 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.
    21. Chow, Hwee Kwan & Kim, Yoonbai & Sun, Wei, 2007. "Characterizing exchange rate policy in East Asia: A reconsideration," Journal of Asian Economics, Elsevier, vol. 18(3), pages 448-465, June.
    22. Barry Eichengreen, 2006. "The Parallel-Currency Approach to Asian Monetary Integration," American Economic Review, American Economic Association, vol. 96(2), pages 432-436, May.
    23. 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.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Keddad, Benjamin, 2019. "How do the Renminbi and other East Asian currencies co-move?," Journal of International Money and Finance, Elsevier, vol. 91(C), pages 49-70.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Benjamin Keddad, 2013. "Exchange rate coordination in Asia under regional currency basket systems," Economics Bulletin, AccessEcon, vol. 33(4), pages 2913-2929.
    2. de Truchis, Gilles & Keddad, Benjamin, 2013. "Southeast Asian monetary integration: New evidences from fractional cointegration of real exchange rates," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 26(C), pages 394-412.
    3. Keddad, Benjamin, 2019. "How do the Renminbi and other East Asian currencies co-move?," Journal of International Money and Finance, Elsevier, vol. 91(C), pages 49-70.
    4. Naoyuki Yoshino & Sahoko Kaji & Tamon Asonuma, 2016. "Dynamic Effects of Changes in the Exchange Rate System," Asian Development Review, MIT Press, vol. 33(1), pages 111-161, March.
    5. Aihua Wang & Faruk Balli & Xiumin Li, 2015. "Possible Best Currency Basket Selection from the Perspective of Real Effective Exchange Rate," Pacific Economic Review, Wiley Blackwell, vol. 20(4), pages 635-650, October.
    6. Ma, Guonan & McCauley, Robert N., 2011. "The evolving renminbi regime and implications for Asian currency stability," Journal of the Japanese and International Economies, Elsevier, vol. 25(1), pages 23-38, March.
    7. Caporale, Guglielmo Maria & Gil-Alana, Luis A. & You, Kefei, 2018. "Exchange rate linkages between the ASEAN currencies, the US dollar and the Chinese RMB," Research in International Business and Finance, Elsevier, vol. 44(C), pages 227-238.
    8. Aggarwal, Raj & Muckley, Cal B., 2010. "Assessing co-ordinated Asian exchange rate regimes: Proposal for a possible move towards a common currency," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 20(2), pages 149-165, April.
    9. Yoshino, Naoyuki & Kaji, Sahoko & Asonuma, Tamon, 2014. "Dynamic Analysis of Exchange Rate Regimes: Policy Implications for Emerging Countries in Asia," ADBI Working Papers 502, Asian Development Bank Institute.
    10. Teo, Wing Leong, 2009. "Should East Asia's currencies be pegged to the yen? The role of invoice currency," Journal of the Japanese and International Economies, Elsevier, vol. 23(3), pages 283-308, September.
    11. Kwack, Sung Y., 2005. "Exchange rate and monetary regime options for regional cooperation in East Asia," Journal of Asian Economics, Elsevier, vol. 16(1), pages 57-75, February.
    12. Naoyuki Yoshino & Sahoko Kaji & Tamon Asonuma, 2014. "Dynamic Transition of Exchange Rate Regime in China," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 22(3), pages 36-55, July.
    13. SATO Kiyotaka & Shajuan ZHANG, 2019. "Do Exchange Rates Matter in Global Value Chains?," Discussion papers 19059, Research Institute of Economy, Trade and Industry (RIETI).
    14. Masahiro Kawai & Shinji Takagi, 2012. "A Proposal for Exchange Rate Policy Coordination in East Asia," Chapters, in: Masahiro Kawai & Peter J. Morgan & Shinji Takagi (ed.), Monetary and Currency Policy Management in Asia, chapter 9, Edward Elgar Publishing.
    15. Click, Reid W., 2009. "The ASEAN dollar standard in the post-crisis era: A reconsideration," Journal of Asian Economics, Elsevier, vol. 20(3), pages 269-279, May.
    16. Ogawa, Eiji & Ito, Takatoshi, 2002. "On the Desirability of a Regional Basket Currency Arrangement," Journal of the Japanese and International Economies, Elsevier, vol. 16(3), pages 317-334, September.
    17. Kearney, Colm & Muckley, Cal, 2008. "Can the traditional Asian US dollar peg exchange rate regime be extended to include the Japanese yen?," International Review of Financial Analysis, Elsevier, vol. 17(5), pages 870-885, December.
    18. H. Gao, 2008. "Global dollar standard: challenges for Asian financial integration," Economic Change and Restructuring, Springer, vol. 41(4), pages 369-382, December.
    19. Shimizu, Junko & Ogawa, Eiji, 2005. "Risk properties of AMU denominated Asian bonds," Journal of Asian Economics, Elsevier, vol. 16(4), pages 590-611, August.
    20. Shu, Chang & He, Dong & Cheng, Xiaoqiang, 2015. "One currency, two markets: the renminbi's growing influence in Asia-Pacific," China Economic Review, Elsevier, vol. 33(C), pages 163-178.

    More about this item

    Keywords

    Asian Currency Unit; Monetary integration; Currency basket peg; Nominal exchange rate coordination.;
    All these keywords.

    JEL classification:

    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:aim:wpaimx:1345. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: https://edirc.repec.org/data/amseafr.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Gregory Cornu (email available below). General contact details of provider: https://edirc.repec.org/data/amseafr.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.