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

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  • Taizo Motonishi

    (Australia-Japan Research Centre)

Abstract

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.

Suggested Citation

  • Taizo Motonishi, 2009. "Are the East Asian Currencies still Misaligned? An Analysis Based on Absolute PPP-Income Relationship using Panel Data," Macroeconomics Working Papers 22882, East Asian Bureau of Economic Research.
    • Handle: RePEc:eab:macroe:22882
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    References listed on IDEAS

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    1. Mr. Atsushi Iimi, 2006. "Exchange Rate Misalignment: An Application of the Behavioral Equilibrium Exchange Rate (BEER) to Botswana," IMF Working Papers 2006/140, International Monetary Fund.
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    3. Eiji OGAWA & Junko SHIMIZU, 2007. "Progress toward a Common Currency Basket System in East Asia," Discussion papers 07002, Research Institute of Economy, Trade and Industry (RIETI).
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    Keywords

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    JEL classification:

    • E00 - Macroeconomics and Monetary Economics - - General - - - General
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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