Exchange Rate Asymmetry and Flexible Exchange Rates under Inflation Targeting Regimes: Evidence from Four East and Southeast Asian Countries

Victor Pontines and Reza Siregar

MPRA Paper from University Library of Munich, Germany

Abstract: We demonstrate that the economies of Indonesia, Korea, Philippines and Thailand, which are among the first group of emerging markets to embrace the inflation targeting framework of monetary policy, tend to adopt a form of an asymmetrical exchange rate behaviour wherein appreciation pressures are restrained more substantially than depreciation pressures. In short, these four Asian economies exemplify aversion to appreciations such that greater flexibility is allowed only one side of the market. Formal econometric tests using the smooth transition autoregressive and the Markov regime switching models confirm this hypothesis of aversion to appreciation and show that the central banks of these four economies tend to tolerate more of depreciations than of appreciations of their local currencies against the US dollar.

Keywords: Exchange Rate Asymmetry Inflation Targeting; Fear of Floating; Fear of Appreciation; Regime Switching Models. (search for similar items in EconPapers)
JEL-codes: E58 F31 F41 (search for similar items in EconPapers)
Date: 2010-08-28
New Economics Papers: this item is included in nep-cba, nep-ifn, nep-mac, nep-mon and nep-sea
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Exchange Rate Asymmetry and Flexible Exchange Rates under Inflation Targeting Regimes: Evidence from Four East and Southeast Asian Countries (2012)
Book: Exchange Rate Asymmetry and Flexible Exchange Rates under Inflation Targeting Regimes: Evidence from Four East and Southeast Asian Countries (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:25260

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