The AMU Deviation Indicators Based on the Purchasing Power Parity and Adjusted by the Balassa-Samuelson Effect
This paper investigates how the AMU Deviation Indicators for surveillance measurements among East Asian currencies are improved by changing their benchmark rates from the constant rates in 2000-2001 to time-varying rates based on their Purchasing Power Parities (PPPs). The Consumer Price Indexes (CPIs) are used to calculate their PPPs as a time-varying benchmark for the AMU Deviation Indicators. Because the CPIs include prices of non-tradable goods, the PPPs based on the CPIs have a problem related with the Balassa-Samuelson effect. For the reason, the PPPs adjusted by the Balassa-Samuelson effect should be used to calculate the AMU Deviation Indicators when the CPIs are used as price data. This paper compares the two types of the PPP-based AMU Deviation Indicators and the PPP-based AMU Deviation Indicators adjusted by the Balassa-Samuelson effect. We conclude that both the PPP- based AMU Deviation Indicators and the PPP-based AMU Deviation Indicators adjusted by the Balassa-Samuelson effect are also useful in making surveillance over overvaluation or undervaluation of the intra-regional exchange rates of East Asian currencies.
|Date of creation:||Nov 2012|
|Contact details of provider:|| Postal: 2-1 Naka, Kunitachi City, Tokyo 186|
Web page: http://www.ier.hit-u.ac.jp/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Krugman, Paul R., 1978. "Purchasing power parity and exchange rates : Another look at the evidence," Journal of International Economics, Elsevier, vol. 8(3), pages 397-407, August.
- Eiji Ogawa & Junko Shimizu, 2006. "Stabilization of Effective Exchange Rates Under Common Currency Basket Systems," NBER Working Papers 12198, National Bureau of Economic Research, Inc.
- J.S. Eades, 2005. "East Asia," Chapters, in: A Handbook of Economic Anthropology, chapter 34 Edward Elgar Publishing.
- Balassa, Bela, 1973. "Just How Misleading are Official Exchange Rate Conversions?: Comment," Economic Journal, Royal Economic Society, vol. 83(332), pages 1258-67, December.
- OGAWA Eiji & YOSHIMI Taiyo, 2009. "Analysis on β and σ Convergences of East Asian Currencies," Discussion papers 09018, Research Institute of Economy, Trade and Industry (RIETI).
- Masahiro Kawai & Shinji Takagi, 2005. "Towards regional monetary cooperation in East Asia: lessons from other parts of the world," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 10(2), pages 97-116.
- Eiji Ogawa & Michiru Sakane, 2006. "The Chinese Yuan after the Chinese Exchange Rate System Reform," Discussion papers 06019, Research Institute of Economy, Trade and Industry (RIETI).
- Bela Balassa, 1964. "The Purchasing-Power Parity Doctrine: A Reappraisal," Journal of Political Economy, University of Chicago Press, vol. 72, pages 584-584.
- Eiji Ogawa & Michiru Sakane, 2006. "Chinese Yuan after Chinese Exchange Rate System Reform," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 14(6), pages 39-57.
- Ogawa, Eiji & Shimizu, Junko, 2006. "Stabilization of effective exchange rates under common currency basket systems," Journal of the Japanese and International Economies, Elsevier, vol. 20(4), pages 590-611, December.
When requesting a correction, please mention this item's handle: RePEc:hst:ghsdps:gd12-255. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Tatsuji Makino)
If references are entirely missing, you can add them using this form.