Co-Integration Among Asian Currencies: Evidence of the Increasing Influence of the Japanese Yen

JAPAN AND THE WORLD ECONOMY, Issue 220, 1995

Posted: 21 Apr 1998

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

Mbodja Mougoue

Wayne State University - Finance

Abstract

This is a study of the co-integration between the Japanese yen and two sets of Asian currencies, i.e., currencies of the "Tigers"--Hong Kong, South Korea, Singapore, and Taiwan--and currencies of the ASEAN nations--Malaysia, Philippines, Thailand, and Singapore. Accounting for deviations from normality, non-stationarity, and the presence of unit roots for periods longer than other co-integration studies, it is documented that, in contrast to the findings for the major currencies, both sets of Asian currencies are found to be co- integrated with the Japanese yen. Further, it is found that the influence of the Japanese yen has been increasing relative to the U.S. dollar in recent years. This evidence of co-integration between the yen and other Asian currencies has important implications for understanding Asian financial integration, the increasing international role of the Japanese yen, and for developing asset allocation and cross- hedging strategies for investments denominated in these Asian currencies.

JEL Classification: F15, F31, F36

Suggested Citation

Aggarwal, Raj and Mougoue, Mbodja, Co-Integration Among Asian Currencies: Evidence of the Increasing Influence of the Japanese Yen. JAPAN AND THE WORLD ECONOMY, Issue 220, 1995, Available at SSRN: https://ssrn.com/abstract=4150

Raj Aggarwal (Contact Author)

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

Mbodja Mougoue

Wayne State University - Finance ( email )

328 Prentis Bldg.
5201 Cass Avenue
Detroit, MI 48202
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313-577-0058 (Fax)

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