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
Date Written: January 5, 2010
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: Suggested Citation