Chapter 7 Stability of East Asian Currencies during the Global Financial Crisis

Junko Shimizu and Eiji Ogawa

A chapter in The Evolving Role of Asia in Global Finance, 2011, pp 157-180 from Emerald Group Publishing Limited

Abstract: We investigate fluctuations in the nominal effective exchange rates (NEERs) of East Asian currencies and the Asian monetary unit (AMU), which is computed as a weighted average of East Asian currencies during the global financial crisis. We find that NEERs were more stable for countries that continued to follow a currency basket system during the global financial crisis. Furthermore, we investigate the relationships among NEERs, AMU, and AMU deviation indicators, which indicate the extent of the deviation in the exchange rate of each East Asian currency from a benchmark rate given in terms of the AMU. By comparing NEERs with a combination of AMU and AMU deviation indicators, we find that there is a strong relationship between them, both before and after the global financial crisis. These results indicate that a coordinated exchange rate policy aimed at stabilizing the AMU deviation indicators will be effective in stabilizing the NEERs of East Asian currencies. In this respect, the AMU deviation indicators, which indicate intraregional exchange rates among East Asian currencies, play a crucial role. Because NEER trade weights are widely similar among East Asian currencies, a policy aimed at stabilizing a home currency against its NEER may lead to a coordinated exchange rate policy without a common consensus among East Asian countries. In the future, however, coordinated monetary policies should be considered along with coordinated exchange rate policies.

Keywords: Asian monetary unit (AMU); AMU deviation indicator; de facto US dollar peg system; currency basket system; nominal effective exchange rate (NEER); coordinated exchange rate policy; the Chiang Mai Initiative; trade weight; GDP measured at PPP; European currency unit (ECU); implicit basket weights; currency regime; surveillance; European monetary system (EMS) (search for similar items in EconPapers)
Date: 2011
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (text/html)
https://www.emerald.com/insight/content/doi/10.110 ... 8715(2011)0000009012
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (application/pdf)
Access to full text is restricted to subscribers

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eme:fegzzz:s1574-8715(2011)0000009012

DOI: 10.1108/S1574-8715(2011)0000009012

Access Statistics for this chapter

More chapters in Frontiers of Economics and Globalization from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().