The Impact of Real Exchange Rate Flexibility on East Asian Exports

Mizanur Rahman

The World Economy, 2009, vol. 32, issue 7, 1075-1090

Abstract: This paper estimates the impact of intra‐regional real exchange rate flexibility on East Asian exports. The hypothesis is that the impact would be negative for East Asian countries regardless of their exchange rate regimes. The results validate the hypothesis. The findings show that for Chinese exports the long‐run effect is as much as that of a real appreciation of renminbi. By contrast, for Japanese exports the effect is three times larger than that of a real appreciation of the yen. The findings imply that a regional currency basket mechanism would lessen the adverse effect of exchange rate flexibility and engineer a collective exchange rate adjustment for resolving the global payment imbalance against East Asia.

Date: 2009
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