Regional Monetary Coordination in Asia after the Global Financial Crisis: Comparison in regional monetary stability between ASEAN+3 and ASEAN+3+3

This paper analyzes how much deviation we have among Asian currencies, which include the Indian rupee, the Australian dollar, and the New Zealand dollar, given that we are discussing the East Asian Community based on ASEAN+3 (Japan, China, and South Korea)+3 (India, Australia, and New Zealand). We investigate whether intra-regional exchange rates increase in instability or deviation when the additional three countries (India, Australia, and New Zealand) join the ASEAN+3. Contribution of each currency to the weighted average of AMU-wide Deviation Indicators shows that movements in the Japanese yen have contributed to those in the weighted average of the AMU-wide Deviation Indicators over time during the sample period from January 2000 to January 2010. Moreover, we use concepts of β and σ convergences in the context of economic growth to statistically analyze convergence or divergence for the ASEAN+3+3 currencies. The addition of the Indian rupee into the ASEAN+3 currencies made the regional currencies unstable before and during the global financial crisis. Moreover, comparison between ASEAN+3+3 and ASEAN+3+Indian currencies shows that the addition of only the Indian rupee was relatively more stable than the addition of the Australian dollar and the New Zealand dollar as well as the Indian rupee since September 2008. It is worthy to consider that India will join the Chiang Mai Initiative to manage currency crises while the monetary authorities will conduct surveillance over stability of the intra-regional exchange rates in the near future.