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The exchange rate regime in Asia : From Crisis to Crisis

  • Ila Patnaik

    (National Institute of Public Finance and Policy)

  • Ajay Shah
  • Anmol Sethy
  • Vimal Balasubramaniam

Prior to the Asian financial crisis, most Asian exchange rates were de facto pegged to the US Dollar. In the crisis, many economies experienced a brief period of extreme flexibility. A `fear of floating' gave reduced flexibility when the crisis subsided, but flexibility after the crisis was greater than that seen prior to the crisis. Contrary to the idea of a durable Bretton Woods II arrangement, Asia then went on to slowly raise flexibility and reduce the role for the US Dollar. When the period from April 2008 to December 2009 is compared against periods of high inflexibility, from January 1991 to November 1991 and October 1995 to March 1997, the increase in flexibility is economically and statistically significant. This paper proposes a new measure of dollar pegging, the "Bretton Woods II score". We find that by this measure Asia has been slowly moving away from a Bretton Woods II arrangement.

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Paper provided by East Asian Bureau of Economic Research in its series Finance Working Papers with number 21852.

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Date of creation: Jan 2010
Date of revision:
Handle: RePEc:eab:financ:21852
Contact details of provider: Postal: JG Crawford Building #13, Asia Pacific School of Economics and Government, Australian National University, ACT 0200
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