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Estimation of Asian effective exchange rates: a technical note

Author

Listed:
  • San Sau Fung
  • Marc Klau
  • Guonan Ma
  • Robert N. McCauley

Abstract

Discussion of exchange rate policy in Asia would benefit from appropriate measures of exchange rates on a multilateral basis. The purpose of this paper is to refine the construction of the effective exchange rates (EERs) for Asian economies, to make allowances for the role of Hong Kong SAR as an entrepôt and to reflect the fast-growing intra-regional trade. For the scenarios under consideration, it turns out that adjusting for re-export trade through Hong Kong SAR is generally more important in the determination of trade weights than updating the base year. The proposed refinements have important policy implications, particularly in estimating the relative sizes of currency blocs, should the region's exchange rate policies become more oriented to trade baskets than to bilateral dollar rates.

Suggested Citation

  • San Sau Fung & Marc Klau & Guonan Ma & Robert N. McCauley, 2006. "Estimation of Asian effective exchange rates: a technical note," BIS Working Papers 217, Bank for International Settlements.
  • Handle: RePEc:bis:biswps:217
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    References listed on IDEAS

    as
    1. Robert C. Feenstra & Wen Hai & Wing T. Woo & Shunli Yao, "undated". "The U.S.-China Bilateral Trade Balance: It'S Size And Determinants," Department of Economics 98-09, California Davis - Department of Economics.
    2. Robert N McCauley, 2002. "Setting Monetary Policy in East Asia: Goals, Developments and Institutions," Occasional Papers, South East Asian Central Banks (SEACEN) Research and Training Centre, number occ33.
    3. Corrinne Ho & Guonan Ma & Robert N McCauley, 2005. "Trading Asian currencies," BIS Quarterly Review, Bank for International Settlements, March.
    4. Marc Klau & San Sau Fung, 2006. "The new BIS effective exchange rate indices," BIS Quarterly Review, Bank for International Settlements, March.
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    Cited by:

    1. 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.

    More about this item

    Keywords

    effective exchange rates; intra-regional trade;

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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