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Are the East Asian Currencies still Misaligned? An Analysis Based on Absolute PPP-Income Relationship using Panel Data

  • Taizo Motonishi

    (Australia-Japan Research Centre)

Registered author(s):

    Over 10 years after the currency crisis, the degree of exchange rate misalignment is still an issue of contention for East Asian countries. This study evaluates the degrees of currency misalignment of Korea, China, Malaysia, Thailand, the Phillipines, and Indonesia by examining absolute purchasing power parity (PPP)-income relationships using panel data. The distinction between local currency misalignments and the US dollar misalignment is stressed. The estimated misalignments in 2007 were 22.4 per cent overvaluation for the Indonesian rupiah, 12.5 per cent overvaluation for the Philippine peso, and 15.6 per cent undervaluation for the Malaysian ringgit.

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    File URL: http://www.eaber.org/node/22882
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    Paper provided by East Asian Bureau of Economic Research in its series Macroeconomics Working Papers with number 22882.

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    Date of creation: Jan 2009
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    Handle: RePEc:eab:macroe:22882
    Contact details of provider: Postal: JG Crawford Building #13, Asia Pacific School of Economics and Government, Australian National University, ACT 0200
    Web page: http://www.eaber.org

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    1. Atsushi Iimi, 2006. "Exchange Rate Misalignment; An Application of the Behavioral Equilibrium Exchange Rate (Beer) to Botswana," IMF Working Papers 06/140, International Monetary Fund.
    2. Cheung, Yin-Wong & Chinn, Menzie D. & Fujii, Eiji, 2007. "The overvaluation of Renminbi undervaluation," Journal of International Money and Finance, Elsevier, vol. 26(5), pages 762-785, September.
    3. Motonishi, Taizo, 2002. "Modifications of the Balassa-Samuelson Model: The Effects of Balanced Growth and Capital Accumulation," Journal of the Japanese and International Economies, Elsevier, vol. 16(1), pages 31-49, March.
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