Assessing Co-Ordinated Asian Exchange Rate Regimes: Proposal for a Possible Move Towards a Common Currency

27 Pages Posted: 6 Jan 2010 Last revised: 2 Feb 2010

See all articles by Raj Aggarwal

Raj Aggarwal

University of Akron; Federal Reserve Banks - Federal Reserve Bank of Cleveland; Kent State University; Kent State University Foundation

Cal B. Muckley

University College Dublin

Date Written: January 5, 2010

Abstract

This study assesses prospective Asian exchange rate regimes and finds short- and longrun currency dynamics more conducive to the introduction of a common peg based on a basket of the European euro, the United States dollar and the Japanese yen than the alternative of a United States dollar peg exchange rate regime. Exchange rate systems of 3, 4 and 5 - Asian currencies are considered and the dynamics in a set of four European currencies prior to the introduction of the Euro provides benchmark evidence. The evidence for an Asian basket peg exchange rate regime is strengthened when, unlike prior studies, estimates of the long-run parameters account for time-varying volatility effects.

Keywords: Asia, Basket Exchange Rates, Currency Pegs, Exchange Rate Regimes

JEL Classification: F02, F31, F33, F42

Suggested Citation

Aggarwal, Raj and Muckley, Cal B., Assessing Co-Ordinated Asian Exchange Rate Regimes: Proposal for a Possible Move Towards a Common Currency (January 5, 2010). Journal of International Financial Markets, Institutions and Money, 2011, Available at SSRN: https://ssrn.com/abstract=1531797

Raj Aggarwal

University of Akron ( email )

Akron, OH 44325-4803
United States

Federal Reserve Banks - Federal Reserve Bank of Cleveland ( email )

East 6th & Superior
Cleveland, OH 44101-1387
United States

Kent State University ( email )

College of Business Administration
Kent, OH 44242-0001
United States

Kent State University Foundation ( email )

Akron, OH 44325-4803
United States

Cal B. Muckley (Contact Author)

University College Dublin ( email )

Blackrock, Co. Dublin
Ireland
+353-1-716-8091 (Phone)

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