Monetary and Exchange Rate Stability in South East Asia

Christian Bauer () and Bernhard Herz ()

Macroeconomics from Department of Economics, Economics I, Bayreuth University

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)
JEL-codes: D84 E42 F31 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-ifn, nep-mac, nep-mon and nep-sea
Date: 2006-08
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Persistent link: http://EconPapers.repec.org/RePEc:uba:hadfwe:sea-bauer-herz-2006-08

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