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Estimation of Asian effective exchange rates: a technical note

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

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.

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Paper provided by Bank for International Settlements in its series BIS Working Papers with number 217.

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Length: 35 pages
Date of creation: Oct 2006
Date of revision:
Handle: RePEc:bis:biswps:217
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  1. Robert C. Feenstra & Wen Hai & Wing T. Woo & Shunli Yao, 1998. "The US-China Bilateral Trade Balance: Its Size and Determinants," NBER Working Papers 6598, National Bureau of Economic Research, Inc.
  2. Corrinne Ho & Guonan Ma & Robert N McCauley, 2005. "Trading Asian currencies," BIS Quarterly Review, Bank for International Settlements, March.
  3. Robert N McCauley, 2001. "Setting Monetary Policy in East Asia: Goals, Developments and Institutions," RBA Annual Conference Volume, in: David Gruen & John Simon (ed.), Future Directions for Monetary Policies in East Asia Reserve Bank of Australia.
  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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