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

Author

Listed:
  • 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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    File URL: http://www.eaber.org/node/22882
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    References listed on IDEAS

    as
    1. Jeffrey Frankel, 2006. "On the Yuan: The Choice between Adjustment under a Fixed Exchange Rate and Adjustment under a Flexible Rate," CESifo Economic Studies, CESifo, vol. 52(2), pages 246-275, June.
    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.
    4. 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.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    currency; ppp-income; panel data;

    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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