Fear of Appreciation in East and Southeast Asia: The Role of the Chinese Renminbi

Victor Pontines and Reza Siregar

MPRA Paper from University Library of Munich, Germany

Abstract: Our study brings into light the evidence of a fundamental role of the Chinese renminbi in shaping the exchange rate behavior of other major Asian currencies. We obtain results suggesting that there is an additional dimension to the ‘fear of appreciation’ or ‘fear of floating in-reverse’ behavior, initially coined by Levy-yeyati and Sturzenegger (2007)with regards to the cases of these major Asian currencies. In particular, we find that there is a greater degree of aversion to appreciation of these same Asian currencies, specifically, the Philippine peso and the Thailand baht against the renminbi than against the US dollar. This heightened fear of appreciation against the Chinese currency confirms that trade competition indeed matters in this part of the world and that the fear continues to play a central role in the exchange rate management behavior of major Asian currencies. This is understandable as the rising role of China as a major trading hub in the region as well as globally, must then render the renminbi to exert a significant influence to the rest of the currencies in the region.

Keywords: Asymmetrical Exchange Rate Regime; East and Southeast Asia; Regime Switching Models (search for similar items in EconPapers)
JEL-codes: E58 F31 F41 (search for similar items in EconPapers)
Date: 2010-09-24
New Economics Papers: this item is included in nep-ifn and nep-sea
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Related works:
Journal Article: Fear of appreciation in East and Southeast Asia: The role of the Chinese renminbi (2012)
Book: Fear of Appreciation in East and Southeast Asia: The Role of the Chinese Renminbi (2010)
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