Monetary and exchange rate stability in South and East Asia

Christian Bauer and Bernhard Herz

Pacific-Basin Finance Journal, 2009, vol. 17, issue 3, 352-371

Abstract: Regaining exchange rate stability has been a major monetary policy goal of East Asian countries in the aftermath of the 1997/98 currency crisis. While most countries have abstained from re-establishing a formal US Dollar peg, they have typically managed the US Dollar exchange rate de facto. We show that most of these countries were able to regain their monetary credibility within a relatively short time period. The Argentine crisis in 2001 caused a minor setback in this process for some countries. We measure the credibility of monetary policy by separating the fundamental and excess volatility of the exchange rate on the basis of a chartist-fundamentalist model. The degree of excess volatility is interpreted as the ability of the central bank to manage the exchange rate via the coordination channel.

Keywords: Monetary; policy; Exchange; rate; policy; Credibility; Technical; trading; East; Asia (search for similar items in EconPapers)
Date: 2009
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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:17:y:2009:i:3:p:352-371

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